Despite gaining on its rivals this morning following optimistic German data, the Euro lost ground against the US Dollar, Japanese Yen and British Pound as trade continued.
The Euro Exchange Rate was in the region of 0.8630 against the British Pound as of 12:38 am GMT
This morning a better-than-forecast German Ifo index (an influential survey of German business confidence) allowed the Euro to gain on the majority of its counterparts.
The Ifo index soared from 104.3 in December to 107.4 in January, supporting the belief that the largest economy in the Eurozone will avoid recession.
Following the report’s release ING’s Carsten Brzeski commented: ‘While most other Eurozone countries remain stuck in recessionary territory, preoccupied with structural reforms and austerity, German businesses are surfing on the wave of optimism.’
However, after initially strengthening against major rivals the US Dollar, Japanese Yen and British Pound, additional developments caused the Euro’s upward movement to be reversed.
The Euro’s declines began after the European Commission slashed its growth forecast for the 17-nation currency bloc, and were exacerbated by the European Central Bank stating that banks will repay less of its three-year loans than predicted next week.
The EC negatively revised its 2013 forecast for overall Eurozone growth, now estimating that GDP will fall by 0.3 per cent this year, rather than the 0.1 per cent predicted in November. The struggling European labour market was cited as a key issue with the commission’s head of economics asserting: ‘It’s a serious concern. This has grave social consequences and will, if unemployment becomes structurally entrenched, also weigh on growth perspectives going forward.’
Meanwhile, although economists expected 356 banks to reimburse the ECB 122.5 billion Euros of its second three-year loans the financial institutions will only repay 61.1 billion Euros.
Next week several significant pieces of Eurozone data, including German CPI and Eurozone consumer confidence could trigger extreme fluctuations in the common currency.
Signs of economic weakness could cause the Euro to lose ground, but any additional signs of recovery could lead to the currency achieving new highs.
References to the US debt ceiling and any further global commentary regarding exchange rate interference will also be of interest.
Euro Exchange Rates
As of 12:38 am
The Euro to Pound Sterling (EUR/GBP) exchange rate is trading in the region of 0.8630
The Euro to US Dollar (EUR/USD) exchange rate is trading in the region of 1.3178
The Euro to Australian Dollar (EUR/AUD) exchange rate is trading in the region of 1.2750
The Euro to New Zealand Dollar (EUR/NZD) exchange rate is trading in the region of 1.5713
The Euro to Canadian Dollar (EUR/CAD) exchange rate is trading in the region of 1.3422
The Euro to Japanese Yen (EUR/JPY) exchange rate is trading in the region of 122.9100
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