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Confidence in the Eurozone drops to a 3-year low


Economic confidence in the Euro region has fallen more than economists expected to a three-year low in August after European leaders failed to reign in the debt crisis and the area’s economy slid closer to an inevitable recession.

An index of consumer and executive sentiment dropped to 86.21 from the 87.9 figure seen in July the European Commission said. It is the lowest figure for the index since August 2009. Economists had been predicting a decrease to 87.5.

The Euro has done relatively well in the currency markets due to higher risk sentiment among traders and investors. This optimism has arisen due to the strong words of the European Central Bank that has vowed to save the Euro from going the way of the Dodo.

“The euro-region economy will continue to show negative growth rates, with a moderate contraction in the second half,” said Uwe Duerkop, an economist at Landesbank Berlin, “The question is what will happen next in terms of the crisis? I wouldn’t necessarily only expect negative news over the next months; a lot of adjustment measures have already been decided and that’s why there’s a basis for this crisis to peter out.”

So far this year the Euro has depreciated by 3.2% against the US Dollar after Cyprus and Spain were forced to ask for bailout assistance in June, joining the list of Greece, Portugal and Ireland. Weaker than expected GDP figures from across the Eurozone, slowdowns in Germanys productivity and the ever rising unemployment rate have done little to ease doubts or raise confidence that the Eurozone is close to emerging from the debt crisis.

“The German economy is slowing because most of its trading partners are either in recession or slowing very sharply,” said Dirk Faltin, a senior economist at UBS AG in Zurich, told Bloomberg “Even if we see a slowdown in Germany, it’s not going to be more than a soft patch. So far things are holding up, we still think we’ll get some kind of global pickup over the coming months.”

China’s rate of growth has slowed as demand for its exports wanes, the world’s biggest economy; the United States has lessened demand for capital goods dropping its lowest level for eight months. For confidence to be restored then the European Central has to fulfill its promise to take firm action and it has to do it soon, many traders and businesses have grown tired of the ECB’s big talk and failure to deliver. Definitive action has to be taken.

The Pound to Euro exchange rate is currently trading at 1.260

The Pound to US Dollar exchange rate is currently trading at 1.582

The Pound to Australian Dollar exchange rate is currently trading at 1.531

The Euro to US Dollar exchange rate is currently trading at 1.255

The Euro to Pound exchange rate is currently trading at 0.792

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