The euro has known better weeks; there was some stalling of the recent upward trend as both the pound and the US dollar recovered some of their recent losses. The pound saw a dip against the euro midweek after Labour market data showed wage growth remaining static and unemployment dipping to 4.3%, but the support of inflation data late last week and the BoE statement yesterday meant that the pound has been enjoying a much better September compared to the August lows.
The US dollar also staged a comeback against the euro. It held on to gains against both the euro and the yen at the end of last week and ploughed ahead despite indications that inflation remains weak. The Producer Prices Index rose by just 0.2% in August, against the forecast 0.3%, and was largely boosted by petroleum prices. Much will depend on what is over the next hill; North Korea has fired another missile over Japan which may impact the dollar and the yen and allow the euro to recover, but the concerns of the ECB are not being ignored. Any overvaluing of the currency could have a negative impact of the long term outlook for the Eurozone and this has weighed on the currency.
Elsewhere, the euro’s fortunes were closely mirrored by those of the Canadian dollar. Like the Loonie, it has known considerable strength in recent months but as other currencies started to fight back the inexorable rise was put in check.
There are some significant events on the horizon, most notably the German election on 24th September so the market will have to wait with everyone else to see if the recent rally will resume following a perceived positive outcome or whether other currencies might continue to rally.
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