Dismal Euro Zone Figures

The euro slid further on Friday after dismal industrial output figures caused investor concerns about the Euro Zone’s economy. Earlier in the week the dollar to euro rate rose as the Euro’s rise above $1.41 triggered automatic sell off orders that put downward pressure on the currency. Investors are also speculating about the possibility of a rise in US rates. Investors also waited for the results of the G8 meeting.

European Shares Decline

A decline in European shares and oil prices also affected the euro to dollar rate in currency markets and triggered safe haven buying which benefited the dollar. Earlier in the week better than expected US payroll data prompted a rise in risk appetite putting downward pressure on the dollar.

Investors Watching G 8

Investors are watching the G8 meeting closely and any statement from the group is bound to affect global currency exchange rates. Currencies are not expected to be a high priority at the G8 meeting and many expect the finance ministers to focus on global recovery which may raise demand for higher yielding assets. Dag Muller of SEB in Stockholm stated, “If you think the dollar is tightly linked to risk appetite, then this would be dollar negative.”

US Auction Dollar Positive

Many currency experts believe that the well received auction of US 30 year Treasuries was dollar positive. The auction helped to convince investors that demand for US debt is still strong. Euro Zone industrial production fell 21.6% from last year, a record drop. Analysts had expected a decline of 20.2%. The figures had a negative effect on the euro to dollar rate. Maurice Pomery of Strategic Alpha in London stated, “I’m not surprised the figures are poor. The euro zone economy will suffer, it will suffer more than the rest of the world, ergo my view that the euro will underperform for quite some time.”