Good Afternoon,

The Bad News Continues

The Euro has undergone a dramatic weakening recently as investors begin to wonder what bad news will come out next. Confidence levels continued to fall in September and revised PMI indices were lower across the board.

The banking sector is beginning to falter with a raft of shotgun marriages between banks and governments witnessed last week. It will remain an important driver in the direction of the Euro as the exposure to toxic assets is fully felt. There may be more bad news to come as Euro banks were generally more highly leveraged than their US counterparts.

The inflation outlook is thankfully a weakening one, and the case for a rate cut continues to strengthen. This looks more likely following Trichet’s increasingly dovish tone following last week’s ECB rate hold decision at 4.25%.

The market is looking for direction on what measures will be used to control and minimise the damage as credit markets are drying up, with some leaders called for a unified approach to a unified problem.

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Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.

Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.