Euro currency surprisingly resilient to negative comments but for how long?

The euro currency remains firm against the US dollar this week and it’s surprisingly resilient to all the negative comments that seem to be coming from all directions, including Germany and Brussels, but for how long will the euro hold up?

Latest Euro Exchange Rates

As of 08:26 GMT this morning 1 euro bought $1.30510 US dollars (the 52 week low is $1.20610) and against GBP the euro bought £0.85270 (the 52 week low is £0.77790). Looking at the numbers, it’s a fair bet to say that any downward correction for the eurozone’s shared currency could easily wipe 10 percent off the value of the euro, which would take it back to 52 week lows.

Euro Pessimism Growing

On Wednesday one of the German government’s closest economic advisers claimed that the euro has a “limited chance of survival” and may only endure another five years. Dr Konrad, chairman of a scientific council that advises the German finance ministry, said: “Europe is important to me. Not the euro. And I would only give the euro a limited chance of survival.”

Asked whether he thought the single currency would last five years, the economist said: “A concrete period is hard to identify as it depends on so many factors. But five years sounds realistic.”

This pessimistic judgment by a senior adviser runs counter to the official German government view that the euro must be held together for the sake of unity in Europe.

Eurozone Interest Rates

Meanwhile, ECB policymakers have once again rebuffed suggestions that Europe should ease up on austerity and said that while the central bank has room to cut interest rates, such a move would not necessarily help the economy much. This news comes after recent hints from Barosso and Draghi that interest rates cuts could be on the cards as early as next month. So what’s going on?

The ECB decided to leave interest rates on hold this month, but President Mario Draghi said the bank would “monitor very closely” all data and stands “ready to act” to help the euro zone climb out of recession.

One thing is for certain as the most recent surveys and data have pointed to economic weakness spreading to the eurozone core, and on Wednesday Germany’s Ifo sentiment indicator came in weaker than the most pessimistic of forecasts as poor exports undermined Europe’s largest economy. With Europe’s economy in meltdown mode, a high valued currency will not help matters. Expect the euro to head lower anytime soon.

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Euro currency surprisingly resilient to negative comments but for how long?