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although the euro seems pretty comfortable in the ranges of 1.1080 and 1.1170, we could start to see it break higher, touching to 1.1250, and perhaps 1.13 again in the near term. Euro zone GDP (gross domestic product) is due out tomorrow at 9am GMT, this data could send the stock markets tumbling as well as the euro, as we see the European economy shrink yet again. the figures are expected to show a decline of - 2 % quarter on quarter and -4.1% year on year, compared to last years -1.5%. From this we can see the massive difference in the state of the economy over one year, and things could continue to get worse before they get better. We saw the euro touch on 1.13 at the end of last week but soon fell back to 1.10/1.11 after the ECB cut their rates down to 1%. Going from a wait and see aproach to actively trying to ease inflationary pressures gave the euro immense strength, and becuase of this it is unclear what they will do at their next meeting. Weber does not want to go below their floor rate of 1% however some other members are arguing to cut futher. we shall have to wait and see!
Discuss on this on the Currency Exchange Forum
May 14, 2009 @ 4:30 pm
I agree Sam- the GDP data tomorrow will be important as it is expected to confirm the sharp decline in GDP that has been recently forecast…if we do see a contraction of 2% or more quarter on quarter then the euro should weaken…all eyes will then be on the next move by the ECB- the market will look for more action in the form of either interest rate cuts or more bond purchasing to play catch up with other major economies which have acted sooner than the ECB.