The Euro has fallen once again and is hovering just above a two year low against the Dollar. The sharp decline comes after production across the nation’s industrial sector slid by 3.5% in May compared to the previous year and is down 1.9% month-on-month. The figures show that that French economy is suffering badly from the weakening Eurozone economy. Italian industrial output for May plummeted by 6.9%.
The two day meeting of European finance ministers has also failed to improve risk sentiment after the ministers offered no positive surprises for the markets. They agreed on granting Spain and extra year to reach its deficit reduction target and established a new aid package for the nations struggling banks. To the disappointment of observers the meeting did not provide any progress on the activation of rescue funds needed to intervene in the bond markets.
Market expectations for the euro zone finance ministers' meeting had not been high to begin with, but the outcome highlights a seeming lack of urgency on the part of policymakers.
Disappointing import figures out of China has also pulled on the embattled single currency as investors look to safe haven currencies such as the Dollar and Yen.
The Euro is hovering in the region of 1.228 against the Dollar with no sign that it will see improvements. We can expect the currency to slip to a new two year low.
The increasing strengthening of the US Dollar has put severe pressure on the country’s exports and is being blamed for the slowing down of the country’s economic recovery. Many investors are calling for the Federal Reserve to implement a new round of Quantitative easing in order to weaken the currency and make American exports more competitive.
