German Data Weighs Down Euro

February 8, 2011 - Written by John Cameron

STORY LINK German Data Weighs Down Euro

Concerns over the servicing of individual nations’ sovereign debts continue for investors in Euro denominated assets. The latest Spanish bond auction has a disappointing uptake and EU Leaders met on Friday to discuss the overhauling of the €440bn emergency bailout fund. Comments following the meeting suggested that the fund may be bolstered at a special meeting next month.

However an increase to the size of the fund may serve to spook institutional investors further and cause further pressure on the Euro. Last week’s down-grading of Ireland’s national debt further fuelled fears that levels of European debt are unsustainable in the long term.

ECB President Jean-Claude Trichet’s closely-watched press conference on Thursday failed to provide any support for the Euro. His comments indicated that the ECB feels that current interest rates are at an appropriate level and dampened speculation of any rate hike in the short-to-medium term.

This morning saw the release of disappointing German Industrial Production figures. They showed that German Industrial Production grew year-on-year by 1.5% less than had been expected for the year ending 31st December 2010. This figure followed yesterday’s worse-than-expected factory order figure for December, giving rise to fears that the Eurozone’s major economy is not going to prove strong enough to lead Europe to economic recovery.

The Eurozone Sentix sentiment survey for February, which was released yesterday morning came out better than had been expected, however this has failed to budge the Euro from its current downtrend. With a lack of Eurozone data this week to divert attention from concerns over the Sovereign Debt situation, the Euro remains susceptible to selling pressure in the short term.

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