Euro is heading lower today, due in large part to the latest economic news. It appears that economic contraction is a very real possibility, and that is weighing on euro today. The news is supporting predictions that the European Central Bank will cut interest rates on Thursday in order to help stimulate the economy.
The expectation of an interest rate cut, along with concerns for the eurozone economy, are dragging on the euro today. Markit Economics reports that the purchasing managers’ index edged up to 46.4 in June from the 46.0 level in May. However, this slight increase doesn’t do much in terms of allaying fears. The index uses 50.0 as a dividing line between expansion and contraction, and the data indicates that the eurozone is in a state of contraction.
A eurozone recession wouldn’t be very helpful to efforts to overcome the sovereign debt worries. Even if you think that the plans made at the recent EU summit will help the situation, there are still a number of hurdles for the eurozone to overcome. There is still plenty of room for contraction, and the euro’s losses today reflect that.
At 15:30 GMT EUR/USD is down to 1.2525 from the open at 1.2608. EUR/GBP is down to 0.8036 from the open at 0.0837. EUR/JPY is down to 99.9635 from the open at 100.5985.
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