Forex broker reports are witnessing a constant downward trend from the Euro, who suffered another debilitating week and is dangerously approaching the 1,20 mark.
Forex broker reports are witnessing a constant downward trend from the Euro, who suffered another debilitating week and is dangerously approaching the 1,20 mark.Paradoxically, this current frailty could represent a lifesaver for the European monetary union. “The Euro is continually loosing investing appeal and faces pressure from other currencies as less and less investors are willing to keep it in their portfolios”, explains Kathleen Brooks, a broker analyst at forex.com.“But a significant depreciation against its main currency rivals, especially the dollar, would allow a partial compensation for the loss of competitiveness in Italy and reinforce the exporting capacity of the two main Eurozone economies, France and Germany, while serving as life support for the exiguous economic growth in Europe”, concludes Brooks. Indeed, according to forex broker reports, a 10 percent fall in the Euro against other currencies (not just the dollar), could increase by 0.7 percent the Eurozone growth. “Still, this data should not be overestimated”, according to Michel Martinez, chief economist at the Société Generale, “as the effects will be noticeable for at least another 6 months”. Also, a general perception in the forex broker community is that the gradual transformation of initial euphoria caused by the European meeting held in June into skepticism is the best proof that nothing really has been solved. “After seeing a slight improvement in the Euro’s performance following Brussels’ meeting, increasing concerns about the Spanish and Italian bank system’s health have provoked a 4 percent loss against the dollar”, said a forex analyst. In effect, Spain is implementing harsher austerity measures that have received wide disapproval from both the general public and labor unions, who see them as the final straw that will inevitably bring about the country’s financial collapse.In the case of Italy, a bailout plus similar austerity measures can be applied in a not so distant future, as the country is suffering from unsustainable high yields for too long. After the recent elimination of the deposit rate by the ECB, money continues flowing out of Europe. Forex wise, the Euro/Dollar pair started the week with a small recovery attempt, but this met the 1.2330 line. From there, it was all downhill as the pair gradually lost ground getting close to the critical 1.2150 mark. This week’s forex broker closely monitored main events include the German ZWE Economic Sentiment survey, taking place on Tuesday. One of the most important and forward looking indicators for Germany, when it turned negative last month, the Euro certainly felt it, so the market is eagerly awaiting for this month`s outcome. Experts are waiting for a similar figure as last months’ -20.1 points.