Sterling Euro Exchange Rates Hold Steady As Eurzone GDP Falls
It was announced yesterday that Eurozone inflation held steady at a worryingly low 0.4% while Gross Domestic Product (GDP) fell to 0% meaning the single currency economy is close to falling into recession while they are also close to seeing the economy drop into deflation. As a result the pressure is certainly mounting on the European Central Bank (ECB). Should an economy have two consecutive quarters of negative growth they are officially classed as being in recession so yesterday’s news will be very disconcerting for Eurozone investors and the ECB and could mean more weakness for the Euro. However, yesterday’s negative news from Europe did not really weaken the Euro but just halted Sterling’s slide meaning the rates ended the trading session relatively flat which will provide some relief for those clients looking to buy Euros who have seen rates fall from over a 2 year high at 1.27 back down to the 1.24’s. The figures from the Eurozone yesterday highlight just what a bad position the Euro is in at the moment and so I still believe that this could be a temporary dip but the comments on Wednesday from Mark Carney that Sterling is over valued is still ringing in the market’s ears and is worrying, should the Bank of England go back to the days when they “talk down the Pound” when they felt it was getting too strong we could be in for another period of volatility with Sterling suffering. The hope for many clients will be that today’s GDP figures for the UK will show an improvement from the current 0.8% figure as this would go to show the gap between the UK and the Eurozone economies and may go to boost Sterling exchange rates.
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