FCD Currency World Cup – The Final

As the FIFA World Cup comes to an end this weekend so does the FCD Currency World Cup with the battle Royale between the Euro (Germany) and the Argentinian Peso. Over the past 6 weeks these two nations and therefore currencies have risen to the top and will contest for the much wanted Title. This currency blog will examine the two currencies and how their recent fortunes compare to see which comes out as the strongest currency and therefore the winner of the Foreign Currency Direct Currency World Cup!

Germany – The Euro (EUR)

This morning we have seen German inflation data announced which have marginally improved, rising by 0.1% in June, while it is always positive to see an improvement it is unlikely this small uplift will make much of a difference to Euro exchange rates. However, inflation is one of the key drivers for the Euro at present as it has been falling sharply in recent times and was one of the major reasons the European Central Bank took the surprise move to cut interest rates and even put deposit rates to negative levels which is a big move and really encourages banks to lend more money and with the low interest rates is designed to get people spending to try and boost the economy and see inflation levels increase. In the meantime it was announced yesterday that there are some major concerns surrounding Portugal’s largest bank Banco Espirito Santo which apparently have some “serious” accounting irregularities. This news follows on from issues with 2 of Bulgaria’s largest banks and the fact that the Euro continues to weaken. All in all the picture is pretty bleak in the single currency economy but as regular readers will know, currency market outlooks can change very quickly.

Argentine Peso (ARS)

The Peso is far more volatile than the Euro and of course is far less traded however, there are still several positives for the Argentine economy compared to the Eurozone. Despite this though the country is currently embroiled in intense talks over the resolution of a dispute on government debt which, if the talks fail, will mean the country is likely to default on its debts. Argentina needs to agree a deal before the end of the month or will risk a default which could cause major economic problems for the Peso as if the Argentine government cannot agree a deal to pay back the hedge fund  that is currently attempting to collect Argentine bonds the country will be barred from paying back other investors hence the default. This is of course a major issue for the Peso and the Argentine economy.

 

  • The Argentine stock market is up by over 60% this year alone and in fact is the top performing market in the world, compared to the German DAX which is jut up by 1%. 1 – nill Argentina.
  • Germany has a much higher debt to GDP percentage at a worryingly high figure of 78.06% while Argentine register at just 47.73%. 2 – nill Argentina.
  • The German economy is growing at 2.3% a year while the Argentine economy is contracting. 2 – 1 Argentina.
  • The Germans have a higher credit rating than Argentine with a triple A Rating from all three of Moody’s, S&P and Fitch while Argentina have a CCC- rating. 2 – 2
  • Germany unemployment is currently at 5.1% while Argentina is at 7.1%. 3 – 2 Germany.

 

So, with a far stronger exchange rate of €1 = 11ARS and a stable but perhaps slightly sluggish economy compared to the emerging economy of Argentina Germany and therefore the Euro just edges it. So, despite all the current problems faced the Euro is crowned as the winner of the FCD Currency World Cup.

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