Euro Calm After the Storm Against the US Dollar

The EUR/USD relationship has settled down after the volatility of the exchange rates between the two currencies yesterday, following the announcements made by European Central Bank (ECB) President Mario Draghi, after the bank’s policy meeting.

The euro is currently buying $1.12, having began the morning CET at $1.129.

This follows the peak of the euro purchasing $1.138, in the early part of yesterday afternoon, after the ECB said there would be no further monetary stimulus packages for now.

The main interest rates will remain on 0%, the ECB’s Governing Council decided.

In a warning after the policy meeting ended, Mr Draghi said that conditions for growth in the euro area, are not likely to produce a very positive outcome.

Although more optimistically, he did say that inflation would increase at some point this year, and would pick up further in 2017.

There was not repeat the raft of stimulus measures in March, such as the lowering of the deposit facility rate to a minus 0.4% down from 0.3%.

And the expansion of the quantitative easing asset purchasing programme, which increased to EUR 80 billion a month from EUR 60 billion.

FC Exchange Analyst Daniel Wray wrote in his daily report that given the actions in March, it is no surprise the ECB are keen to wait and see what effect the added stimulus will have.

He added, the challenge going forward will be to ensure the euro does not strengthen further and weaken the competitiveness of euro area exports, should inflation and growth begin to pick up.

There was more encouraging news from the euro area flash consumer confidence indicator, after three consecutive months of decline

The survey picked up in the European Union (EU) by 0.5 points to 6.8 points, while the euro area also hiked up by 0.4 points and has leapt up to minus 9.3.

Meanwhile, the GBP/USD has also calmed after an explosive day yesterday, now sterling is buying $1.434, after starting the day GMT at $1.432.

This is despite some soft data that has been released from the UK , with UK retail sales falling by 1.3% in March compared to February, coupled with unemployment rates hiked up by 21,000 between December to the end of February.

Government Deficit up to 2.3% of GDP in the Euro Area

In the fourth quarter of last year, the volume of government discrepancies as a ratio of GDP increased by 0.5% to 2.3% in a quarter on quarter comparison, according to Eurostat.

Arrears were also hiked up to 2.4% across the EU, in contrast to the 2.2% that was recorded for the third quarter of 2015.

Central government revenue for the euro area amounted to 46.7% of GDP, a slender quarter on quarter increase.

Total government expenditure in the euro area stood at 49.0% of GDP, compared with 48.4% of GDP in the previous quarter.

In the EU, government revenue was pegged at 45.4% of GDP in the final quarter of last year, a rise of 0.4%.

While in the EU government expenditure was 47.8% of GDP, a climb of 0.5% in contrast to the previous quarter.