Euro at all-time high as US economic fears grow

Analysis

The euro opened the new trading week on an upbeat note by surging to an all-time of $1.4130 Monday as concerns have set in about the outlook for the US economy.

The euro’s new record comes in the buildup to the release this week of another batch of critical US economic data and amid growing speculation that the US Federal Reserve will be forced to trim rates again in the run up to the end of the year. The American monetary authorities decision to deliver an aggressive 50-basis points last Tuesday helped the euro to charge ahead with the common currency having since then sprung from record high to record high as it pushed its way to the key $1.45 mark. By mid-morning European trading, the euro had edged back to $1.4125.

Nevertheless, this is a long way from the common currency’s early days following its 1999 launch. With the eurozone overshadowed by robust US economic growth, the euro sunk to a record low of 82.52 (US) cents in October 2000. The euro has climbed by about two per cent last week with Tuesday’s Federal Reserve rate cut helping to narrow the interest rate differential with the 13-member eurozone. Moreover, worries that the US subprime mortgage market crisis could undercut growth in the US have helped to fuel expectations of a further slowdown in the giant American economy. (m&c.com)

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