The Euro to Pound (EUR/GBP) exchange rate and Euro to US Dollar (EUR/USD) exchange rate fell sharply on Monday as European Central Bank President Mario Draghi hinted that government-bond buying could be a policy tool officials could use to stimulate the economy if the Eurozone’s outlook worsens.
Over the past year, the Euro has fallen in value against both the Pound and US Dollar and as such, European trade saw the benefits of a weaker currency in the month of September.
According to European Union’s statistics agency Eurostat, Eurozone exports surge by 9% on a year on year basis.
The overall trade surplus for the currency bloc hit a record high of €18.5 billion in September, a big jump from the €10.8 billion seen in the previous year and was larger than the revised €8.6 billion seen in August.
The Euro found little support from the report however as the market is growing increasingly concerned over the strength of the global economy.
British Prime Minister David Cameron warned at the G-20 summit in Brisbane Australia that; ‘Red warning lights are once again flashing over the state of the global economy. The Eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too.’
Against the US Dollar, the Euro weakened after data showed that Japan had fallen back into recession. The news increased demand for safer assets at the expense of the Euro.
Russia Worries Rise
Geopolitical concerns are mounting as fears over the conflict in Ukraine increase. Comments made by Russian President Vladimir Putin in a German newspaper increased worries that the conflict could escalate and the threat of new sanctions being imposed by the West onto Russia have risen.
Putin warned that he would not allow rebels in eastern Ukraine to be defeated by Ukrainian government forces.
‘You want the Ukrainian central authorities to annihilate everyone there, all of their political foes and opponents. Is that you want? We certainly do not. Moreover, we will not let it happen. We are very concerned about any possible ethnic cleansings and Ukraine ending up as a neo-Nazi state,’ said Putin.
Over the weekend, German Chancellor Angela Merkel said that the EU would keep its economic sanctions in place for as long as necessary.
Market attention will now shift to a speech due to be given by European Central Bank President Mario Draghi. Economists will be looking for any signs that Draghi is edging closer to introducing more measures to help stimulate economic growth and inflation.
Euro Exchange Rate News:
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