Eu economy grows: good news for currencies?

Photo:Eisenrah

The euro area's two largest economies were both expected to show decline in the three months to September, as fears surrounding recession continue. Indeed, low confidence has struck many countries in the EU amid an ongoing economic malaise.

Today, though, figures revealed that Germany's GDP rose 0.1 per cent, while France's rose 0.3 per cent, its biggest margin of growth in a year.

GDP rose by 0.2 per cent overall in the euro area, according to Eurostat, with seasonally adjusted GDP jumping 0.8 per cent compared to the same period in 2013.

Nonetheless, there remain concerns about countries at the Centre of the continent: Italy's GDP fell 0.1 per cent in Q3 2014, its 13th quarter in a row of no growth, while Germany's growth is tempered with caution, as officials lower their predictions for the coming year. Indeed, sanctions against Russia in response to the Ukraine crisis have impacted upon Germany's export trade, which is adding to the negative conditions in the country.

How have the currency markets reacted?

The euro has had a tough year so far, falling 11 per cent since May. That slide continued this week, with the single currency down 0.1 per cent against the dollar to $1.2462 this morning. Indeed, in the third quarter, US GDP has grown by a healthier 0.9 per cent, far outpacing the euro area.

The pound, though, has also fallen against the dollar, down 0.3 per cent ($1.56), a potential fourth consecutive week of decline. Indeed, the pound even fell 0.1 per cent against the euro, reports Bloomberg.

“The U.K. is not immune from spillover effects from the euro zone,” Peter Kinsella, a senior foreign-exchange strategist at Commerzbank AG, told the news publication.

“It is clear that the market is pricing out Bank of England rate hikes until late 2015 at the earliest. As a result, you are seeing some position-squaring that put downward pressure on the pound.”