Last week saw the Euro exchange rate plunge to a one-year low against the Pound and fall against several other peers as data releases from outside the Eurozone dominated much of the week’s movement.
The start of the week saw the single currency soften against the US Dollar and other peers such as the Australian Dollar as the latest ZEW investor confidence data for Germany showed that confidence in the region’s largest economy declined unexpectedly in January. Losses were restrained however as a separate report showed that Sentiment in the wider Eurozone also showed signs of improvement with the index rising to 73.3 from 68.3. The figure was also better than the 70.2 economists had forecast.
The biggest mover for the Euro however came against the Pound. Data released in the UK surprised the markets by showing that unemployment in the country fell from 7.4% to 7.1%, just above the 7% target set by the Bank of England for it to look into its monetary policy. Sterling consequently surged by 0.5 per cent against the Euro and gained on the US Dollar. Despite the fall against the Pound the Euro leapt to a four year high against the Canadian Dollar after the Bank of Canada chose to maintain interest rates at 1%.
As the week drew to a close the Euro found support from comments made by European Central Bank President Mario Draghi. During the Davos conference Mario Draghi stated; ‘There is this return of confidence. So ideally it is a much better situation to perform asset quality review and stress tests than it was in 2011 when the markets were in constant turmoil. Many things have happened to the banking system all over the world and to the European banking system as well.’
As a result of his words the Euro recovered ground against the Pound and other peers.
Today the Euro fell from session highs as the market grew jittery over a broad sell-off of riskier assets as concerns build over problems in some emerging market economies bolstered demand for safe haven currencies.
Looking ahead to the coming week the Euro could receive some support from data out of the Eurozone’s member states. With retail sales, confidence and GDP all due for EZ members the currency could find support. As the week draws to an end we will see whether the fragile recovery is having any impact on the regions record high unemployment figures. If the data disappoints we cane expect the single currency to weaken.
Key events for the week ahead
Thursday 30th January – German unemployment rate
Eurozone – Consumer confidence
Business Confidence
Friday 1st February – Eurozone – Core inflation rate
Inflation Rate
Unemployment Rate
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8260 ,
Euro,,US Dollar,1.3677 ,
Euro,,Canadian Dollar,1.5135 ,
Euro,,Australian Dollar,1.5683,
Euro,,New Zealand Dollar,1.6621 ,
US Dollar,,Euro,0.7311 ,
Pound Sterling,,Euro,1.2105 ,
Canadian Dollar,,Euro,0.6605 ,
Australian Dollar,,Euro,0.6376 ,
New Zealand Dollar,,Euro,0.6015 ,
[/table]
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