The Euro is deemed to continue outclassing its British counterpart today after European Commission President Jose Manual Barroso declared yesterday that the threat to the Euro has been overcome, providing a positive outlook for the region this year. Meanwhile, elevated fears that the UK economy is headed for a triple-dip recession this year are presumed to continue weighing on the Sterling.
At a diplomatic conference in Portugal, Jose Manuel Barroso asserted that the Euro has been saved and that the Euro crisis is a thing of the past. “I think we can say that the existential threat against the Euro has essentially been overcome. In 2013, the question won’t be if the Euro will, or will not, implode,” he said. Barroso believes that the turning point was last September’s pledge by the European Central Bank to buy unlimited amounts of Euro Zone states’ debts. Further, he said investors now understood that EU leaders had committed themselves to the currency’s survival. Echoing his remarks, a report yesterday revealed that investor confidence in the bloc is on the mend. The Sentix Investor Confidence index rose from -16.8 points to -7.0 points in January, exceeding forecasts of a modest improvement to -13.7. The January figure is the highest since February 2011, suggesting vastly improved investor moods toward the Euro Zone.
Today, the single currency is deemed to receive support from an encouraging Retail Sales report for November. In a positive indication that Euro Zone states ramped up their spending leading to the holiday season, Eurostat is seen to report that sales inclined by 0.3 percent in November, rebounding from the 1.2 percent dip in October. Although the region remains mired in recession, the report is deemed to provide optimism that improving consumer confidence could carry the region on track for a recovery. On the contrary, the German Bundesbank is awaited to report that factory orders in Germany declined in November. Purchase orders placed with German manufacturers are projected to have tumbled by 1.4 percent, a stark contrast from the 3.9 percent jump in October. Nonetheless, there is reason to hope as the strong German Retail Sales report released last Friday could result to a better figure.
Meanwhile, anxiety that the UK is headed for a triple-dip recession have ignited after a closely-watched gauge of the services sector showed output shrank for the first time in two years in December. The contraction in services, which account for three-quarters of Britain’s economic output, signifies that the UK economy shrank in Q4. Markit estimates that overall, the economy contracted by 0.2 percent in the December quarter. If output declines again this quarter, the UK will then fall into its third recession in five-years. On a grim outlook for the economy, the Sterling is apt to decline, warranting a long position for the EUR/GBP trades today.
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