Last week’s Euro rally seems to have been short lived as the seventeen nation currency has started to lose ground already against many of its major peers. Last week European Central Bank president Mario Draghi boosted short term confidence in the Euro after stating that the ECB would do whatever was necessary to bolster the single currency. The reason the rally may be short lived is due to tomorrow’s release of data showing current levels of Eurozone unemployment. The unemployment rate is expected to show unemployment rise from 11.1% in May to a new all-time high of 11.2% for June.
Markets will be looking to today’s Italian bond auction to continue to bolster the Euro short term and will hope to see a successful outcome. Many analysts feel that the ECB will need to start buying bonds themselves and accumulate vast amounts of sovereign from Spain and Italy to give the Euro a chance of long term survival. My view on the Euro still remains the same, it’s great to be able to cross borders around Europe and not have to change your currency, but other than that it’s a lame duck that someone should
have been put down and out of its misery a while ago.
The Euro is still down around 2.9% in value over the last month as an average and I don’t see this short blip on Draghi’s comments anything other than a short term confidence boost to stop the Euros rapid
demise. My expectations are for further Euro weakness over the coming months with short term occasional strength from the Euro creeping in on the bank of short term positive sentiment. Sterling although making strong gains against the Euro might continue to struggle as growth looks limited in the UK in the short term and many investors will head into the US Dollar and other currencies as they steer towards safe havens.
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