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Euro Currency Insight - Pound Euro Rate Gains on Disappointing European Growth Numbers

February 15, 2011 - Written by John Cameron

Disappointing growth figures in the Eurozone have weighed heavily on the Euro during today’s European trading session. French quarterly GDP figure for quarter 4 of 2010, released this morning showed growth of 0.4% as opposed to expectations of 0.6%. German counterpart figures also disappointed, with Europe’s industrial powerhouse economy showing weak growth – the quarterly GDP figure coming out at 0.4% against market expectations of 0.5%. The quarterly GDP figure for the whole of the Eurozone was released mid-morning in Europe and again showed weaker growth than anticipated, coming in at 0.3% versus expectations of 0.4%.

The ZEW Economic Sentiment Survey for February was also released this morning and delivered mixed messages, with the Eurozone figure coming out better than hoped, whilst the German equivalent was much worse than expectations, showing little improvement from January’s number.

These soft figures have caused concerns that the economic recovery in the Eurozone may be showing signs of stalling, as sovereign states struggle to deal with unprecedented austerity measures. Some commentators have even suggested that the spectre of a double-dip recession is beginning to hove into view in continental Europe.

Sovereign debt issues continue to provide concern for investors holding Euro-denominated assets as speculation mounts that Portugal may be forced to approach the European Central Bank for emergency funding following a dramatic widening of its bond spreads towards the end of last week. Bolstering of the European Financial Stability Facility may be necessary sooner rather than later. However, the ECB is not meeting to discuss Eurozone debt until next month; this delay may cause more funds to drift away from Europe and onto safer shores with the US Dollar and Swiss Franc likely to benefit, particularly if worldwide economic data releases disappoint.

With little data of note due for release during the remainder of the week in Europe, the Euro will remain susceptible to downside moves as market participants adjust their positions according to risk sentiment.

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TAGS: Euro Forecasts Pound Euro Forecasts

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