Euro exchange rate falls as the eurozone economy slows down21 February 2019
The common eurozone currency slipped on Tuesday by 0.1 percent in exchange rate against the US dollar, as the economic slowdown denied the good influence of progress in the US-China trade talks that sent the euro up flying on Monday. Analysts expect tough week for the single currency.
The euro exchange rate took a tumble
The beginning of the week saw the EUR exchange rate in a good shape as appeared expectations of easing in the US-China trade conflict. Overnight it went up by 0.16 percent, growing further from a three-month low of $1.1234. However, on Tuesday the common currency took a tumble after the euro zone bond yields, including German bonds fell. The reason was a blurry outlook of the European economy. Market analysts expects that the European Central Bank policymakers will slash growth, inflation outlook as they meet on March 7. The eurozone is facing its worst economic slowdown in last 5 years. On Tuesday the exchange rate EUR / USD hit $1.1309, down by 0.1 percent from previous day. Analysts expect a tough weak for the common currency, as the EU commission forecast are about to be published. These will surely only confirm what is widely known – that the economy is halting, while inflationary pressures do not exist. The exchange rate EUR / USD might even get lower than $1.13 point, though is not expected to drift under $1.12. Traders see this situation to remain in spot for next months to come as the ECB will probably maintain is easy monetary policy, the economy will further slowdown, political uncertainties will refuse to leave, and inflation will be tepid.
The British pound went higher
The British pound increase by 0.3 percent to $1.2929, whereas against the euro it went up 0.2 percent to 87.30 pence. It continued the good run of the last week when the pound roared by more than half a percent of Friday. The reason? Some hedge funds believed that the tamed tone on Brexit coming from the Irish foreign minister combined with the strong retail sales of the Great Britain published on early Friday were good signs. Higher exchange rate ended three consecutive weeks of loses. Investors highly anticipated any news on the end of Brexit talks between the European Union and the Great Britain. However so far only chaos has emerged from negotiations and the situation on the British political scene is far from picture perfect. There is a fear of split in the opposition Labor Party. Seven politicians quit on Monday in protest against their leader Jeremy Corbyn. This will probably take a toll on the pound’s exchange rate. As the opposition faces inner fights, Prime Minister Theresa May tries for the last time to save the Brexit deal. The stake is high – if she doesn’t convince EU leaders to save the deal, her Cabinet ministers will rebel against leaving the UE without a deal.
In other news from the currency market
The US market was closed due to holiday so broader markets were quiet. In Japan the yen was weaker against the US dollar, going down to 110.715 yen from previous rate of 110.45 yen. The country’s central bank governor hinted at the possibility of further policy easing. The Australian dollar went down 0.2 percent to $0.7113 influenced by the Reserve Bank of Australia’s policy meeting minutes released on Tuesday. The AUD is considered a barometer of global risk sentiment.
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