The Euro dropped against a bullish US Dollar after Chinese data pushed investors away from higher-risk assets, but the EUR/USD pairing has started to regain ground.
The Euro Exchange Rate was in the region of 1.3068 against the US Dollar as of 10:52 am
Over the weekend a two-day meeting of European Union Finance Ministers came to a close, leaving Euro fluctuations in its wake.
At the Dublin meeting finance ministers from across the EU discussed the necessity of intensifying austerity measures in Cyprus. Although increasing austerity will worsen the economic crisis in the short term, ministers agreed that the island nation needed to implement greater budget cuts than laid out previously in order to receive its bailout.
During the two-day meeting EU policy makers also stressed that austerity in Greece would not be eased and that the nation would remain under pressure. Jeroen Dijsselbloem, President of the Eurogroup, asserted that Greece needs to ‘speed up its efforts’ in order to meet the terms of its lenders.
France and Italy were also criticised for failing to press on with austerity measures and reforms to the labour market.
EU ministers discussed measures for dealing with loopholes in the European tax system, but another significant development to come out of the gathering was the decision to extend Ireland and Portugal’s loan repayment agreements.
Although Ireland was described as a ‘living example that adjustment programs do work, provided there is a strong ownership and genuine commitment to reforms’ the Emerald Isle is still attempting to tackle 14 per cent unemployment and growing poverty.
The EU ministers also stated that ‘despite the difficult economic and domestic conditions’ Portugal would ‘maintain reform momentum.’ The public backlash to the austerity measures taken by the Portuguese government has been intense, and only last week the Portuguese constitutional court ruled that several of the budget cuts forced on the nation were in violation of its constitution.
A day after the meeting came to a close the Euro lost ground against the safe-haven US Dollar after China’s GDP data failed to live up to expectations. Although economists had forecast that the Chinese economy would grow by 8.0 per cent in the first quarter of 2013, it actually expanded by 7.7 per cent. With Chinese industrial production figures also failing to live up to expectations, concerns regarding the recovery of the world’s largest economy grew and higher-risk currencies, like the Euro, slipped.
However, during the European session the common currency began to regain lost ground, briefly edging up to 1.3133 before a downward correction saw it trading in the region of 1.3070.
This morning a report compiled by Eurostat showed that the Eurozone’s trade surplus increased in February. However, the better-than-expected figure was largely due to a drop in import demand, rather than export growth.
Exports rose just 0.1 per cent in February, significantly less than the increase of 1.9 per cent recorded in January.
Eurostat also negatively revised the deficit recorded in January, raising the figure from 3.9 billion Euros to 4.7 billion Euros.
Euro volatility can be expected tomorrow following the release of Eurozone CPI and the publication of the German ZEW economic sentiment survey.
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