The Euro has strengthened to 0.864 against the Pound (EUR/GBP) and 1.3061 against the US Dollar (EUR/USD) as the single currency regions second reading of GDP data for the fourth quarter matched economist predictions and as demand for riskier assets remains high.
The currency’s near term outlook now depends on the European Central Banks stance on interest rates. The Bank will announce its rate decision on Thursday. Economists are predicting that for the moment the bank will opt to maintain the current record low rate of 0.75% but could make further cuts later in the year as projections for both economic growth and inflation are likely to be on the low side.
The possibility of further cuts looks set to make any gains made by the Euro relatively short-lived and leave it pinned down well below its former 15-month high of $1.37 achieved in February.
The political stalemate in Italy following inconclusive elections and the ongoing economic difficulties in France, Spain, Greece, Portugal and a host of other Eurozone nations is also likely to keep the Euro subdued.
“There’s reasonable downside to the Euro. The situation in Italy is still uncertain,” said Bill Diviney, currency strategist at Barclays.
Politicians in Italy are battling to come to a consensus to form a government but such a move seems increasingly unlikely. If Italy cannot form a government then it will be forced to go to the polls once more, a move that will certainly create volatility for the Euro.
Euro Exchange Rates
As of 10:45 am
The Euro to Pound Sterling (EUR/GBP) exchange rate is trading in the region of 0.8640
The Euro to US Dollar (EUR/USD) exchange rate is trading in the region of 1.3061
The Euro to Australian Dollar (EUR/AUD) exchange rate is trading in the region of 1.2716
The Euro to New Zealand Dollar (EUR/NZD) exchange rate is trading in the region of 1.5702
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