Factory data is helping the euro today, boosting confidence in the 17-nation currency region. However, there are still questions about the euro, and concerns about what could be next. As a result, it appears that the euro’s rally is somewhat limited.
Eurozone PMI accelerated in October, and did so in line with expectations. However, other data reveals that eurozone inflation is still well below the 2 per cent target set by the ECB. This news is prompting many to push for the ECB to cut rates when they meet later this week. The benchmark rate is already at 0.5 per cent, which is a record low. Further easing could weigh on the euro.
However, if the cuts ultimately boost economic performance in the eurozone, the long term effects could be good.
Another item helping the euro a bit today is the uncertainty over what the Federal Reserve will do next. No one is quite certain when the Fed will start tapering, but it’s increasingly looking as though it’s not going to happen before the end of 2013. This will keep the dollar somewhat weak, giving the euro the upper hand.
At 15:17 GMT EUR/USD is up to 1.3515 from the open at 1.3488. EUR/GBP is up to 0.8470 from the open at 0.8469. EUR/JPY is up to 133.2740 from the open at 133.2150.
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