Euro Suddenly Drops For No Obvious Reason

The European common currency is suddenly going down at an alarming pace, without any obvious reason. The euro is weakening fast against most major currencies. Here’s some market snapshots, taken a few minutes ago:

EUR/USD:

EUR/GBP:

EUR/JPY:

Here’s what’s being reported at the moment:

* The Wall Street Journal:

The euro hit a fresh three-week low as persistent concerns about slowing economic growth reduced demand for riskier assets.

The common currency at one point hit $1.2753, the lowest since July 22, with investors piling into the dollar and yen, perceived to be safe harbors in times of financial doubt. The euro also fell to a six-week low of £0.8181.

The moves were a continuation of the week’s flight from risk, driven by weak economic reports in the U.S., Asia and Europe, and declines in stock markets globally, said Amelia Bourdeau, senior G10 currency strategist at UBS in Stamford.

* Zero Hedge:

As you might have heard 9 mainly EU-newbies sent a letter to the EC demanding to change the current system of account deficit calculation. They argue their pension reforms should be accounted for in the calculation. The letter was obtained by dpa-afx. Could be a reason for the dropping Euro.

* The Irish Times:

The NTMA sold €500 million of six-month bills at an average yield of 2.458 per cent, against one of 1.367 per cent on July 22nd. Analysts fretted that Ireland, held up as a model for deep budget cuts early on, had little further room for maneuver. There was speculation the European Central Bank (ECB) had intervened to buy Irish bonds, which saw yields stabilize.

The spread over German benchmark bunds has widened by 51 basis points since Friday. Fresh concerns about Irish banking have put the bonds under pressure too.

* The EUobserver.com:

With austerity measures and an EU-IMF bail-out now in place, figures show that the Greek recession deepened in the second quarter as GDP shrank by 1.5 percent and unemployment rose to 12 percent.

The GDP contraction of 1.5 percent accelerated in the three months to June after shrinking by 0.8 percent in the first quarter, the Greek statistical office reported on Thursday (12 August). Economists had forecast just a 1 percent quarterly drop.

* The Financial Times:

The euro tumbled from a three-month high against the dollar this week as concerns over euro zone government debt resurfaced and fears over global growth boosted haven demand for the US currency.

A downgrade to the US Federal Reserve’s growth outlook after its policy meeting on Tuesday reignited concerns over the health of the debt markets in the export-orientated euro zone.

The divergence in the euro zone was further highlighted on Friday as second-quarter gross domestic product figures for the region showed robust growth of 2.2 per cent in Germany but a 1.5 per cent contraction in Greece, which remains firmly in recession, and only modest growth of 0.2 per cent in Spain and 0.4 per cent in Italy.

Ian Stannard, of BNP Paribas, said this divergence in performance would have severe negative consequences for the euro zone, with weak growth in the peripheral nations hampering their efforts to address fiscal imbalances.

“Markets are set to refocus on the woes of the euro zone,” he said. “The peripheral nations need stronger growth – not just German growth – to allow adjustments to take place. And for that they need a weaker euro.”

*


Enhanced by Zemanta
Advertisements

2 Comments

Filed under International Econnomic Politics, National Economic Politics

2 responses to “Euro Suddenly Drops For No Obvious Reason

  1. I bet you wish george bush was still president now

    • econotwist

      I honestly believe that it would not have made any significant difference if either Bush, McCain, Cheney…or even Sara Palin, for that matter, was running the US administration right now. The fundamental problems we’re facing in relation to the environment, poverty and economy are all connected, and have been a loooooooooong time coming!

      “Buy now – Pay later” have been a global slogan for at least two decades.

      Guess what today is… 😉

      Thanks for visiting!
      econotwist