These have not been a happy 12 months for the euro. Traders have marked the single currency down on related fears of a possible recession in the eurozone and the impact of the US-China trade dispute on continental firms, with special reference to the economic powerhouse of Germany.
This morning, the euro traded at $1.1135, slightly higher than its dollar value a month ago, on September 30 of $1.0899 but down on both the $1.1145 at which it traded three months ago, on July 29, and the $1.1373 that a euro bought a year ago, on October 29, 2018.
It has been a similar story against the yen, where the euro is currently trading at 120.5815 yen, up on the 117.805 yen at which it stood a month ago, on September 30, but down on its value three months ago, on July 29, of 121.245 yen.
A year ago, a euro bought 127.795 yen.
Even sterling, supposedly overshadowed by the long-running Brexit saga, has gained ground. One year ago, on October 29, 2018, a euro bought £0.8887. This rose to £0.9121 by July 29 and there was excited talk of the euro achieving parity with sterling.
But decline set in, with the euro buying £0.8865 a month ago on September 30 and £0.8632 today.
Last week, Mario Draghi, outgoing president of the European Central Bank, offered a gloomy assessment of the outlook for the eurozone. He noted that the 19-nation bloc had seen slower growth this year, in common with some other economies, and warned that it faced “protracted weakness” heading into 2020.
Suspicion of loose policy
He said: “The incoming data since the last governing council meeting in early September confirms our previous assessment of a protracted weakness in the euro area growth dynamics, the persistence of prominent downside risk and muted inflation pressure.”
Draghi added: “The main risk from all viewpoints, but especially also from a financial stability viewpoint, is a downturn in the economy… whether it is global or it is in the euro-zone.”
His comments followed a survey of business activity that pointed to the eurozone entering a period of flatlining growth. German companies were the worst affected, with employment in Europe’s largest economy falling for the first time in six years.
ECB interest rates are negative and Draghi commented, “It has been a very positive experience. Negative rates have stimulated the economy, have affected positively employment.” But his ultra-loose monetary policy has not always found favour with Germany which, for historical reasons, is suspicious of any deviation from central-bank orthodoxy.
Draghi’s replacement is Christine Lagarde of France, formerly managing director of the International Monetary Fund (IMF).