18, February 2013

EUR/USD (a 4-hour chart)

EUR/USD (a 4-hour chart)

There was a decline in GDP for the eurozone in the IV quarter in comparison to III quarter which amounted 0.6%. That number has shown the maximum fall for 4 years. This is the third consecutive quarterly decline in GDP was caused by the GDP decline in France and Germany.

After the release of economic data, the euro fell to the lowest point against the dollar on January 24, and remained close to it at the auction in the United States. Not so good news in France and Germany gave a rise to expectations of the possible downgrade ECB interest rates to boost the economy of the region. Low interest rates can make assets denominated in euro, less attractive for the investors.

Disappointing weak data could put pressure on the ECB to further liberalize and provide a reason for investors to take profits on the currency rise against the dollar which was a 4% this year.

In the 17 countries of the euro zone economic growth in the IV quarter decreased by 0.6%. The sharpest downward movement from the I quarter of 2009, and higher than the average forecast of serious decline - 0.4%.
The future is not a picture of optimism and seemingly Commission will soften its stance.

Perhaps the ECB during 2013 make concessions, and the Governing Council will take action to reduce the basic interest rates to the lowest level as the weakening of the economy leads to a violation of price stability. In his statements Victor Constancio, ECB Vice President, observed probability of negative interest rates on deposits in the euro area, which is also on the single currency pressured.