The Euro is holding close to its lowest-level in a month against the US Dollar as a number of financial groups and the International Monetary Fund warned that the Euro crisis is not over and that further declines in the Euro are expected.
The Euro tumbled last week after European Central Bank President Mario Draghi suggested that the Bank will introduce monetary easing measures next month as inflation remains weak across the Eurozone.
As a result of Draghi’s comments the Euro plummeted from its highest-level since October 2011, to a one-month low.
“We are bearish and think that finally the ECB is ready to back words with action. The market is pricing in some degree of accommodation ahead. The level of the Euro is going to jeopardise the ECB’s inflation forecast. The Euro could fall to around $1.33 heading into the third quarter,” said a forex analyst from UBS.
Pressure was added to the Euro earlier on Monday after the Bank of France released a report in which it predicts that the Eurozone’s second largest economy will grow by just 0.2%.
Its business climate index for the industrial sector fell from 99 in March to 98 in April.
The IMF also put a downer onto the single currency by warning that the regions financial crisis is not over and warned that the Ukraine crisis could disrupt the global economic recovery.
The Euro to US Dollar is currently trading in the region of 1.3765.
IMF chief Christine Lagarde said; “The recovery runs, that’s right. Some countries have completed the auxiliary programmes successfully. But that does not mean the crisis is over and our mission accomplished. The crisis will not be over until the flow of credit in Southern European is repaired. In addition the permanently low inflation brings additional risks.”
The Euro is expected to remain under pressure for the rest of the month as the market waits for June’s ECB policy meeting. An introduction of new stimulus measures will likely weaken the currency significantly.
Tomorrow sees the release of the latest ZEW Economic sentiment report for the Eurozone and Germany. If the data comes in positively the Euro could stabilise. If they come in weaker, the Euro is likely to extend its declines.
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,1.3765 ,
Euro,,British Pound,0.8144 ,
Euro,,Australian Dollar,1.4678 ,
Euro,,Canadian Dollar,1.4986 ,
[/table]
