Euro drops on weak European recovery

Published: 28 Aug at 5 AM Tags: Euro, Dollar,

The euro has plunged to its lowest level in a year against the US dollar as the European Central Bank looks likely to introduce further easing. The single currency has also been hit by weak economic data coming out of the eurozone. Earlier this week the troubled currency fell to a low of $1.3178 before recovering slightly to $1.3200.

German business sentiment has dropped for the fourth straight month and negative yields have done nothing to help matters. Expectations that the ECB is about to boost asset purchasing has led to government bond yields dropping to record lows across the eurozone.

Conversely the Federal Reserve could be about to push up interest rates, something that will further devastate the euro. The Fed and ECB are currently moving in opposite directions.

The euro is also close to a two –year low against the Swiss franc. At 1.2065 francs to the euro, the Swiss National Bank may have to honour its promise to cap the franc at 1.20 per euro. The common currency has also hit a one-week low against the yen at 137.03 and a two-week trough against sterling of 79.50 pence.

The pound was one of the best performers this week pulling off a five-month low against the dollar of $1.6501 to $1.6558.