Euro Rate Forecast

The Eurozone remains very much as divided as it ever has been today. Whilst the Northern states continue to lead the way in terms of economic growth and data, the Southern States face very much opposite circumstances.

Eurozone:Divided could well be a movie title and one could be associated with the tagline – in the face of economic meltdown. The Germans continue to look stronger and stronger and have had some promising business conditions figures this morning and look very much suited to rising European interest rates.

Comparably Italys’ credit rating was downgraded on Saturday by Standard & Poor and Spanish rioting does not bode well for their own economy. Although Greek debt has yet to have a significant effect on the market, Italy and Spain are the third and fourth biggest economies in the zone respectively and debt problems in either state could possibly threaten the Single Currency and the zone’s prosperity as a whole.

A key question I suppose is are the strong states (i.e. Germany and France) as strong as the weak states are weak (i.e. PIIGS)? It could be argued either way, but personally I think that with interest rates likely to rise this division is only likely to expand.

For a more in depth look at exactly how rising interest rates will effect each economy and thus the Single Currency as a whole feel free to contact the author directly on jfm@currencies.co.uk