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 Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
- 2 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Professional big game hunter Ian Gibson crushed to death by elephant during hunt
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
Yemen crisis: Meet the child soldiers who have forsaken books for Kalashnikovs
Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
Rarest Beanie Baby of them all could be sold for £62,500 on eBay
Professional big game hunter Ian Gibson crushed to death by elephant during hunt
Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...