EU data encouraging, but problems remain

August usually sees a re-emergence of the eurozone crisis in one form or another. As we headed into the eighth month of the year, there were a number of potential candidates that might have sparked off another paroxysm of fear regarding the future of the single currency.

PortugalSpain and Greece all seemed beset by problems in July, with political scandals in the first two and more bad economic news in the latter giving reason for investors to fear. However, as August has worn on we have been saved from any new problems in southern Europe, while economic figures from the single currency zone continue to get slightly better.

This has not yet had the desired impact on the euro, which continues to hover around $1.33 after decisively rejecting the $1.34 area at the end of last week. However, there are indications of a growing bullishness in the eurozone, with the spread between German and Spanish bonds narrowing to its smallest level since August 2011.

It now remains to be seen whether EUR/USD will attempt another move to break through $1.34; if this were to succeed we would be looking at a new six-month high for the currency pair, having seen it go all the way to $1.36 and above in the early part of the year.

There are, however, still problems that could derail any rally in EUR/USD. Chief among these is the abysmal unemployment rate in many southern European countries. In Greece the rate hit 27.6% during May, according to data released last week, with youth unemployment running at around 67%. Similar figures are to be seen in Portugal and Spain.

EUR/USD is at something of a crossroads; if weakness persists into the end of the month we could be looking at $1.32 in short order, and then $1.30 if $1.32 fails to hold. Europe has so far got away without another summer crisis, but that does not mean its troubles are over.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.