Euro holds steady under threat of assault
Wednesday 02 June 1999
But analysts predicted it would come under renewed pressure once a key meeting of the European Central Bank today and this week's European summit were out of the way.
"We are approaching a crunch. There is a clear danger the markets will mount a serious assault on the euro," said Mark Cliffe, chief economist at ING Barings.
Many currency experts reckon the euro could dive below parity against the US dollar. It held steady at just above $1.04 yesterday.
The reason for the euro's prolonged weakness was highlighted by new figures showing sluggish growth in European industry in contrast to booming US manufacturing.
The purchasing managers' index of activity declined in the Euro-11 countries, from 50.7 to 50.4 in May, just above the dividing line between recession and expansion. Although French manufacturing rebounded strongly, activity in Germany and Italy continued to slow.
In stark contrast, the same survey for the US revealed a bounce from an already healthy 52.2 in April to 55.2, suggesting there has been no slowdown in the pace of growth in the economy. However, the survey showed the first increase in prices charged by manufacturers since December 1997.
The news hit bond and share prices in the US yesterday because of fears that the Federal Reserve will raise interest rates to slow the economy to a sustainable pace. Analysts will comb labour market figures due on Friday for signs of inflationary pressure from earnings.
The dip on Wall Street, where the Dow Jones index was 117 points lower at 10,442.7 late morning, sent the dollar lower in a knee-jerk reaction yesterday. But the prospect of higher US interest rates at a time when the European Central Bank cannot risk raising its interest rates will keep the euro under pressure.
Edgar Meister, a member of the Bundesbank Council, said yesterday that the weak euro might force the ECB to defend the currency with a rate increase.
But few analysts think the central bank could risk the damage this would inflict on the weak core economies of Europe.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...