Euro Rate Forecast

    The Euro has had a very turbulent time of late against the US dollar and GBP Sterling. Last week the Euro hit a 4 year low against the US dollar and there was even talk of the currency pair hitting parity. Despite this the Euro has rebounded this week both against both the US dollar and Sterling. This is because the major fears of debt default are cooling.

Greek government bonds have been downgraded four notches to “junk” status by Moody’s credit rating agency. Normally such an event would move the market. But such sentiments have long been factored into the markets and as such had very little effect. There is a growing sentiment that the Euro is trading at an acceptable level. There have been lots of financial mechanisms applied to reduce the debt risk presented, namely by Greece to both the Eurozone and the Global Economy. There was also some positive manufacturing data from the Eurozone hinting at a slightly stronger recovery.

The Eurozone represents the world’s second largest economy. I don’t think the economic strength this represents will be allowed to be jeopardised by Greece. An economy that represents only 2.6% of Eurozone GDP.  Yes, there are other countries involved that created the debt, contagion and fear – Portugal, Spain, Italy to name three. But like Greece, these countries have all implemented tough austerity measures and let’s not forget that both the US and the UK have and are having to implement their own tough measures to fight the severe budget deficit problems they face.

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