(MENAFN– ecpulse) The Euro has finally let go and made its way sharply back to below $1.36, seeing it drop over the last week to a two week low after consolidating around the key $1.38 level, its highest level in nearly two years for around a week.
Economic recovery in the Eurozone is feeble! That was essentially the prognosis from two key economic indicators published last week, fueling speculation that the European Central Bank will cut interest rate to help the economy amid lower than expected inflation rates and record high jobless rate.
The number of people out of work in the countries using the euro currency rose slightly in September, as labor market continue to suffer for months if not years to come while inflation fell more than expected — both signs of a weak economy.
The data, which showed Eurozone unemployment stuck at a record high of 12.2 percent and inflation at its lowest level in four years, served as a reminder that a long convalescence lies ahead for Europe, which contradicts with other positive economic news recently, notably an end to the recession in Spain.
Spain, one of the countries hit hardest by the euro zone debt crisis, returned to growth in the third quarter of 2013.
The euro was earlier weighed by comments made by ECB Governing Council member Ewald Nowotny, who said the central bank it is prepared to provide more liquidity when cheap long-term loans it made in late 2011 and early 2012 expire.
Renewed pressure on the euro pushed the dollar index higher to a two-week high last week after a two-day Federal Reserve meeting statement showed the Fed’s policy decision was deemed less dovish than expected although the central bank maintained its bond buying program.
In a statement released after the conclusion of its policy meeting, the Fed decided to continue buying $85 billion in bonds every month and keep its benchmark short-term interest rate near zero.
The Fed pointed to fiscal policy (government spending cuts, the shutdown and debt ceiling debate) as "restraining economic growth."
The central bank has been buying $85 billion in bonds every month since September 2012, and has said it will continue to do so until the job market improves substantially. The program is now nearing $1 trillion in total, yet that goal remains elusive.
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