Euro hits 16-month low
9 January, 2012
The Eurozone has taken yet another beating this week, due to concerns over the state of Europe’s banks. Many of the problems seem to be situated in Italy, with shares in the UniCredit bank falling 14.5 pecent on Wednesday, followed by a 17.3 percent fall on Thursday, a 19 year low. In other European banking news, we’ve also seen falls in shares in Germany’s Deutsche Bank (6%), France’s BNP Paribas (5.3%) and Spain’s Santander (4.5%).
Many European countries seem to have adopted further austerity measures, especially Spain, which is aiming to cut its spending by 8.9bn Euros this year. Whilst these measures will no doubt be welcomed in the Eurozone, it is unlikely they will have a large impact on the overriding problems prevalent in the region. Greece continues to be a problem with the announcement that it may have to default on its debts in March. Its not all bad news for Europe though, with higher than expected manufacturing figures for December and unemployment figures in Germany hitting a record low. France and Germany still seem to be keeping the Euro stable, and this is reflected in their improved business activity for December.
These problems in Europe, combined with the effects of David Cameron’s decisions at December’s Eurozone summit, has dropped the value of the Euro against the Pound to its lowest level in 16 months, giving us the best rates for transferring pounds into Euros since September 2010. In the United States, we have seen increased growth in the service sector which, in turn has increased the value of the Dollar. As with the pound, it has hit a 16 month high against the Euro, giving us the best rates for transferring dollars into Euros.
With the level of problems in the Europe, many people may be worried about the total collapse of the Euro, which may affect decisions to purchase property overseas. With regards to this, it seems that any concerns about the Euro completely collapsing appears to be the result of media sensationalism. While there is no doubt that the Euro is in trouble, the economic and political turmoil that would be caused by disbanding the Eurozone means that, while it is possible that nations with weaker economies (IE: Greece) may drop out, the chances of the entire currency collapsing are very small, and would take years to complete even if it did happen.
The fears of recession in the UK are still looming in certain sectors, but higher figures in the services sector in December seemed to have delayed those fears somewhat. It is thought by many that the Bank Of England may vote for more quantitative easing in the coming months in order to keep the economy stable. Despite these concerns however, sterling is still holding its own against the Euro, offering the best rates for transferring pounds into euros that we’ve seen since 2010.
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