It was a bad month for the euro but not the disastrous one it could have been. The single currency lost six and a quarter cents to the US dollar and was down by five and a quarter cents against sterling. However, the Canadian dollar fell by half as much again and the NZ dollar was not far ahead.
January began with European Central Bank monetary policy front and centre. Inflation had fallen further to -0.2% to become deflation, the dread of central bankers everywhere and especially of the ECB, whose remit is to keep prices rising by 2% a year. The general assumption was that the ECB would at last be forced to bite the bullet of quantitative easing and start printing money.
After a build-up lasting more than a year it was no surprise when on 22 January the ECB announced it would print more than a trillion euros in a QE programme lasting until September next year. It hasn’t started yet, some of the details are still a bit hazy and many economists believe it is too little, too late. Even so, it has already helped the ECB towards one of its objectives; a weaker euro.
In the middle of January, and out of the blue, the Swiss National Bank said it was walking away from its defence of a SFr 1.20 = €1 floor. It had been instigated to protect Swiss business from the dampening effect of an unduly strong currency and had been in place for more than three years. However, the SNB decided it would be impossible to defend its position once the ECB began to churn out the QE cash.
A week later the euro suffered another blow when the crypto-communist Syriza party won power in Greece. Syriza’s election platform was a renegotiation of the country’s bailout terms. Investors worried that it might lead to a default on Greek debt and an exit from the euro. A fortnight on from the election the new government is doing its best to put on a reasonable face but the anxiety lingers, not least because EU leaders have shown absolutely no inclination to negotiate. It is not impossible to imagine Greece being forced out of the euro by the intransigence of Brussels and Berlin.
With those three millstones around its neck, the euro’s five-and-a-quarter-cent monthly decline does not look too bad. What happens to it in February will depend, in large part, on the progress of bailout negotiations between Greece and the other EU members. It would need a miracle, however, to send the euro appreciably higher in the coming month.
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Moneycorp are Sextant French Properties preferred currency partner and have been selected due to their great rates, great service and great solutions. These are some of the reasons they have transacted over two billion pounds for their clients.
Moneycorp has been in the business of moving money between countries and currencies for over 30 years and offers money-saving foreign exchange to customers ranging from blue-chip businesses to private individuals. We make money transfers simple and help you to manage foreign exchange rate movements.
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