Euro strengthens despite slow economic growth

Photo: Eisenrah

The euro has strengthened against both the pound and the dollar this month, despite slow economic growth in the region.

"The main pain is being felt on the continent, with Credit Suisse hitting a 25 year low and Societe Generale (which warned it may miss its profit targets for 2016 due to the dual pressures of tighter regulation and the current market conditions) dropping a whopping 12 per cent," analyst Connor Campbell at Spreadex tells Pound Sterling Live. 

"When markets are in sell-off mode the euro benefits as investors buy the currency to pay back the vast sums of euros borrowed at record low interest rates used to fund market investments," adds the site.

The pound, though, is more expensive, especially after a year in which it grew against most major currencies, buoyed by the UK economy.

Sterling, meanwhile, is set for a tough year, as Britain braces itself for the debate surrounding a potential Brexit referednum. Indeed, the Bank of England has already indicated that the base rate rise planned for the UK is not on the cards for the near future, due to wider economic uncertainty surrounding markets such as China.

The US, meanwhile, has seen positive sentiment weaken, following signs that further rate hikes from the Federal Reserve are unlikely after last year's increase. The dollar fell to a 15-month low against the yen this week and a three-and-a-half-month low against the euro.

The euro's resilience occurs as the latest Eurostat figures show that GBP in the countries that use the euro rose 1.5 per cent in the fourth quarter of 2015. The figure shows steady, if slow, growth for the area, with only Greece and Finland reporting negative growth of 0.6 per cent and 0.1 per cent respectively.