The value of the Euro currency has dropped over 0.5% to $1.1828 this week – the weakest level since the end of December last year according to the Reuters news agency. Investors were caught out recently by the Dollar’s resurgence, having continued to bet on it falling further. The error led to a rush to compensate for losses, pushing the Greenback even higher.
Gold is up €13.80 per ounce as a result of the weaker Euro, in contrast to slight decreases in Dollars and Sterling.
The Euro’s drop has been attributed to a perfect storm of the current uncertainty over Iran (and subsequent benefits to the US Dollar), fears over another general election in Italy, and poor industrial figures released in Germany on Monday.
President Trump withdrew the US from a nuclear accord with Iran yesterday, much to the dismay of Britain, Germany and France – nations also involved in the treaty. The US president described the accord as a “one-sided deal that should have never, ever been made” and promised to re-instate strict sanctions against Iran and foreign investors in the region – many of whom are European businesses.
The US Dollar has also been favoured at the expense of the Euro due to America’s interest rates being relatively higher, with forecasts for the Eurozone being pushed back. Softer economic data from the European Central Bank has cooled eagerness to raise interest rates, with many planned for late 2018 being pushed back into 2019.
Over in Italy and there’s fresh political uncertainty, after a failure in coalition negotiations between the Five Star Movement (anti-establishment) and The League (anti-immigrant/anti-EU) parties – the two largest vote shares from this year’s general election.
President Sergio Mattarella called for the parties to rally behind a neutral government on Monday and cease bickering, but his words were strongly opposed, suggesting another election is now the likely outcome – perhaps coming as soon as July.
The final piece of news came from Germany, where there was an unexpected decline in factory orders. Destatis, the Federal Statistical Office of Germany, reported this industrial decline for March, which goes against the predicted half percent rise in factory orders.
The think tank Sentix reported that Eurozone investor confidence was weaker for the fourth month in a row since the start of 2018. The hope now is that the European Central Bank will delay any plans to wind up its stimulus measures, or stagger the reduction at a new, slower rate.
