The euro dollar exchange rate is today 0.050% lower on the day with 1 EUR = 1.3882 USD.
The euro pound exchange rate is 0.094% lower with 1 EUR = 0.8690 GBP.
"The euro, which rather like the equity markets has been pretty resilient in recent days, finally dipped below the 1.4000 and ended its session there too. The ECB’s statement which was more bearish than simply dovish wasn’t received well by holders of the euro and so the single currency suffered as a result," says a morning note from Simon Denham at Capital Spreads.
Certainly no further interest rate hikes from the ECB can be expected any time soon and we may even see a cut next year if things don’t perk up on the growth side.
"So this morning EUR/USD is at 1.3910 with support and resistance levels are seen at 1.3875/15 and 1.4020/4110 respectively," says Denham.
As mentioned the Euro and equities have been tied together; the extreme market volatility in August has most certainly curtailed investor appetite for risk and likely pushed out the time-frame for sustained flows into equities.
According to Lipper's weekly fund flow reports, equities experienced sharp outflows in August, albeit moderating as the month has progressed.
While retail investors have always been quick to retreat, we believe the volatility has also given institutional investors a reason to pause.
At one point, the VIX was up 70% vs. the end of July, and overall, all major equity indexes were down for the month, including the S&P 500 (-5.4%) and the MSCI EAFE (-9.0%). Those exposed to US fixed income generally fared much better with the Barclays US Aggregate Bond Index up 1.46%.
