There was some positive news for the Eurozone today as consumer confidence in the 17-nation currency block rose in April, despite the Cyprus crisis and Italian political uncertainty of last month.
The Euro Exchange Rate was in the region of 1.3036 against the US Dollar as of 16:16 GMT
Consumer spending is responsible for over 50 per cent of the Eurozone’s economic output, so signs of recovery in this sector could be the boost the 17-nation economy sorely needs.
According to the European Commission, consumer confidence rose from -23.5 in March to -22.3 this month, better than industry experts expected.
Economists had forecast that the index would drop to -23.85.
However, although this is an improvement, consumer confidence remains below the Eurozone’s long term average.
Consumer confidence in the European Union also increased by 1.2 points, moving up to -20.4.
Earlier today the Euro gained after Italian stocks climbed following the re-election of Italian President Giorgio Napolitano.
With Napolitano back in control the odds of Italy overcoming the present political deadlock are improving, and the Euro was initially able to benefit from the fact.
However, before the Eurozone and EU consumer confidence figures were released the EUR/USD pairing edged down, and the Euro continued to decline against its US rival following the publication of a US housing report.
The US data, compiled by The National Association of Realtors, showed that existing home sales dipped by 0.6 per cent in March rather than advancing by the 0.5 per cent expected.
The common currency also lost ground against the British Pound and Japanese Yen after Vitor Constancio, Vice-President of the European Central Bank, intimated that an additional rates cut could occur.
Constancio stated that although the drop in inflation was an ‘important factor’ as ‘inflation is always the first consideration […] At the same time, the economy continued to give signs of weakness, and that’s where we are. So when we have our next meeting we will see the latest information and we will take the decision. [Further rate cuts are] always a possibility.’
The Euro will remain under pressure ahead of tomorrow’s potentially volatile German and Eurozone services and manufacturing PMI figures.
Meanwhile, the Pound has risen against the Euro on the expectation that this week’s UK GDP report will show that Britain avoided entering a triple-dip recession in the first quarter of 2013.
As strategist Lee Hardman notes: ‘Sterling sold off last week as a lot of bad news has been priced in and now it seems to be stabilizing into the GDP data. The market consensus is for flat growth and not a triple-dip recession. Longer-term, we still expect the pound weakness to continue.’
The Pound is currently trading against the Euro in the region of 85.47 Pence per Euro.
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