The Euro (EUR) exchange rate was little changed against the Pound (GBP) and US Dollar (USD) on Tuesday as most of the market’s attention was focused on the outcome of the US Federal Reserve’s policy meeting on Wednesday.
Against the Pound the Euro was experiencing muted trading but was more inclined to the firm after Bank of England Deputy Governor Minouche Shafik said in an interview with the Financial Times newspaper on Monday that she saw no evidence to warrant the BoE raising interest rates now. She added that rising price pressures and the slack in the UK labour market was continuing to deter a rate hike.
‘If you look at what we would expect to see at this point in the recovery, the increase in wages that we have seen has not been significant. We would need to see more of the data pointing in the same direction in terms of price pressures- particularly in terms of wages and unit Labour costs. In terms of sustained domestic inflationary pressures, that’s going to be the ultimate test,’ Ms Shafik said.
Shafik’s comments came a day after fellow Monetary Policy Committee colleague Ian McCafferty reaffirmed his position that the BoE should start raising interest rates now as spare capacity in the UK economy was being used up quickly.
Against the US Dollar, the Euro was experiencing mixed trading as market attention was fixed on Wednesday and the outcome of the Federal Reserve’s monthly policy meeting. Economists are mixed on what the Fed policy makers will say.
Some investors expect a dovish tone due to the concerns over the slowdown in the global economy and in particular the Eurozone whilst others are expecting a hawkish statement. Depending on the comments, the Euro and other currencies will experience volatility on Wednesday.
Sentiment towards the Euro remains vulnerable as data released in Monday’s session did little to ease fears that Germany, (the Eurozone’s largest economy) is heading towards a recession. The data showed that business confidence in the nation fell to its lowest level since the end of December 2012. Fears are growing that fourth quarter growth will be bad, further heightening fears that the wider Euro bloc could slip into a triple dip recession by the end of the year.
A better than forecast Business Confidence report from Italy offered the Euro some support and restrained further losses after confidence rose from Septembers revised figure of 95.5 to 96.0 in October.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.2692 ,
Euro,, Pound Sterling,0.7877 ,
Euro,,Australian Dollar,1.4365 ,
Euro,,Canadian Dollar,1.4237 ,
Pound Sterling,,Euro,1.2696 ,
US Dollar,,Euro,0.7879 ,
[/table]
