Further declines for the euro as the currency reaches its lowest level against the dollar in a year

Yesterday the euro declined to its lowest level in a year against the dollar, which was down 12% from its high in May. This decline was influenced by a raft of data that was released and further investor concerns regarding the viability of the outcomes reached in Brussels last week.

The difficulty in implementing any liquidity and budgetary discipline means that markets are quickly losing faith in the restoration of the euro and are shying away to other currencies.

We expect further market declines today, especially in the EUR as new information showing Greece’s economy is even worse than predicted, which puts further pressure on the viability of the common currency.

As the debt ridden Greece moves into a fourth successive year of recession, the country has been advised by Poul Thomsen from the International monetary Fund (IMF) to rethink its current strategy in place which is aimed at resolving its financial crisis. Thomsen has encouraged Greece to stop concentrating on tax rises and to focus on the countries expenditure, looking into making long-term spending cuts.

Despite the recent activity which has been influencing the currency, the EUR has remained quite resilient up until this point. There are concerns however that for the euro the worse is still yet to come!

GBP/USD is up this morning as there are expectations that UK unemployment data is to remain flat. The GBP was no exception in avoiding sell off yesterday amid mounting euro concerns. However, following Cameron’s decision on Friday to part from the EU treaty, a slight decoupling in the GBP/EUR has and will continue to emerge.

Economic Data

  • UK ILO Unemployment data (3 month data)
  • UK average earnings
  •  Declines are anticipated with EU Industrial production (MoM) as there are slowing amounts ahead of continuing crisis. We expect this to be priced into the market already, therefore this will not impact on currency upon release
  • US Import price index, expected to increase For a live rate, login to RationalFX now

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Instituions named in this article:

IMF: The International Monetary Fund - An organization of 187 countries, aimed at fostering global monetary cooperation, secure financial stability, to promote international economic cooperation, international trade, employment, and exchange rate stability.

http://www.imf.org/external/index.htm