Last week was a bit of a mixed bag for the Euro as economic data showed signs that the single currency region is beginning to see some signs of a recovery but in other aspects the Eurozone remains under pressure from a strengthening of the USA and UK economies.
At the start of the week the Euro was higher against the Pound and had managed to gain ground against the US Dollar after the Eurozone’s weaker economy’s posted a rare bout of better than expected data. Italy released a report which showed that the nation’s industrial production increased more than expected, raising some hope that the Eurozone’s third largest economy is beginning to see the first stage of a move out of recession. Portugal and Greece also offered support to the Euro after both nations published better-than-forecast inflation data.
The wider Eurozone also benefitted as the European Union’s statistics agency revealed that industrial output across the region jumped by 1.8% in November compared to the previous month. Compared to 2012, production soared by 3% smashing expectations for a figure of -0.25%. The increase in industrial production was spread across much of the Eurozone, with Germany recording a 2.4% rise, France a 1.4% increase, Spain a 1% rise and Italy recorded a rise of 0.3%. Output also rose in Ireland and Portugal, but fell by 2.2% in Greece. Estonia was the only other member to record a decline.
Midweek the Euro spent softened against its peers following the release of a report which showed disappointing GDP growth in Germany. The nation’s growth rate for 2013 was lower than expected by coming in at 0.4%, down from expectations for a figure of 0.85%. The Eurozone also published it latest trade data which showed that the region had managed to achieve a surplus. Despite that investors took a negative approach to the report, highlighting that the surplus was the result of weak demand for foreign imports as European citizens continue to refrain from spending.
Thursday saw the release of the region’s latest inflation data which showed that the inflation rate had fallen further away from the European Central Banks target. The currency was prevented from making a sharp decline however after the head of Germany’s Bundesbank and ECB policy maker Jens Weidman delivered a speech in Berlin. Mr Weidman talked down the threat of deflation and set investors at ease.
As the week came to an end the Pound jumped beyond 1.21 to come close to a one-year high against the Euro after the UK currency was bolstered by the release of good retail sales data and as the single currency came under pressure from a weak construction output report. The Pound managed to make gains against the majority of its peers after data released by the Office for National Statistics showed that retail sales in the UK leapt by 2.6% in December smashing economist forecasts for a 0.3% gain.
Euro Currency Prediction
Looking ahead to the coming week we can expect the Euro to take advantage of the relatively quiet news week for the Pound. If Tuesday’s ZEW economic sentiment data comes in strongly and Markit’s monthly PMI reports show improvement then the single currency is likely to make some gains.
The currency needs a string of positive reports to increase confidence that a recovery is in fact underway.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3554 ,
Euro,,British Pound,0.8245 ,
Euro,,Australian Dollar,1.5380 ,
Euro,,Canadian Dollar,1.4845 ,
Key events for the week ahead
Tuesday 21st January – ZEW Economic Sentiment reports
Thursday 23rd January – Markit reports
Eurozone current account data
Friday 24th January – Italian Retails sales