Euro (EUR) Exchange Rate Softens to Record Lows, Anxiety over ECB Decisions Persists
The Euro has recently been underachieving against it peers as investors adjust to the European Central Bank’s decision to slash interest rates to record lows at the beginning of the month in a bid to boost recovery.
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As other currencies fly high in response to upbeat economic developments, the Euro has fallen disappointingly, leading to some of the lowest exchange rates in 20 months.
Friday saw the ‘Single Currency’ close at a softened 1.3536 against the US Dollar. Monday’s final Eurozone inflation figures for May confirmed that non-core inflation came in at 0.5 per cent year on year (in line with previous estimates) and showed a month-on-month increase of 0.1 per cent in May, less than the previous 0.2 per cent gain.
Such unfavourable results won’t help the Euro adopt steady ground.
Monday’s EUR/USD (Euro to US Dollar) exchange rate has fallen to 1.3528 showing the lowest exchange rate for the Euro since February 2014.
Likewise, Monday has also seen the EUR/GBP (Euro to British Pound) exchange rate fall to its lowest figure so far this year and the lowest exchange rate for a year and a half.
The Euro is currently residing at 0.7973 as the Pound continues to strengthen, setting it on trajectory for an impressive 2014 performance as it reaches a nearly five-year high.
The Euro continues to weaken against the Pound after encouraging statements from Charlie Bean, Deputy Governor for the Bank of England, confirmed that interest rates could rise in Britain soon.
Bean said: ‘An increase will be a symbolic step, because it will be an indication that we are on the road back to normality. I would welcome us getting on the path of normalization, as a demonstration that the economy is healing.’
The GBP/USD Pound to ‘Buck’ exchange rate on Monday is currently verging on 1.6969, breaking through to 1.7010 at times for the first time since 2009.
This boost has been enabled by Mark Carney’s speech last week, suggesting the UK’s economy is doing better than expected, and therefore the rise of interest rates could happen sooner rather than initially predicted.
A Citigroup currency expert Josh O’Byrne stated: ‘We continue to be constructive on Sterling, especially against the Euro, where monetary policy cycles are continuing to diverge.’
Monday shows the Euro falling further against not only the US Dollar and the Pound but also the Canadian Dollar, falling 0.18% to 1.4675 and the Australian Dollar 0.09% softer at 1.4393.
With inflation decreasing and the Euro softening further it causes anxiety over the measures the European Central Bank may take to boost the Euro back.
However, the current Iraq crisis also enhances chances of the Euro being popular among investors looking for safe haven assets rather than commodity currencies.