Euro still cheaper despite drop in unemployment

2 March, 2016

Robin Haynes

The Euro remained weaker in trading yesterday, after Monday’s disastrous Eurozone inflation figures continued to fuel expectations of more QE and interest rate cuts in the single currency zone. Even a surprise drop in unemployment to 10.3%, did not send the rate for buying Euros back down, giving some much needed respite for those of you looking to send Euro payments. European unemployment is now at its lowest level since August 2011, but behind the figures are continuing fears over deflation as well as sluggish growth, particularly in manufacturing.

Weaker Eurozone data certainly provides an opportunity to buy Euros at a slightly better exchange rate, but the spike in rates may not last long as the monthly cycle of economic data continues, and the UK in/out EU referendum looms closer, bringing with it enormous uncertainty and a very likely weaker Pound. For the record, Germany had the lowest unemployment rate in January at 4.3%, while Greece (24.6%) and Spain (20.5%) were the two highest.

Canadian Dollar rate drops sharply
Further afield, the Canadian economy is doing rather better than expected, with GDP figures for the fourth quarter last year announced yesterday at 0.8%. This sent the ‘Loonie’ higher in price, with GBP-CAD rates dropping 2c yesterday afternoon. In fact sending money to Canada is now 10% more expensive than just 6 weeks ago, and with the Pound performing so badly overall at the moment, CAD buyers should beware of any further drop in rates in the coming weeks.

Today’s economic calendar
Today’s main data is Eurozone producer inflation at 10am. If figures follow Monday’s consumer inflation with a low number, we could see further opportunities for Euro buyers, but since producer inflation is an indicator of future consumer inflation, a higher than expected figure could easily send the Euro back up in price to the levels we were seeing last week or worse. Watch this space, talk to your Currency Index account manager, and make sure you are able to act on any price movements in the volatile markets we are experiencing at the moment.