The 17-nation currency weakened against all of its major trading peers today as speculation of a decline in German industrial production grew prior to the release of the report today. German data is construed to give a clear picture of the situation in Europe, and declining industrial production is an indication of slowing growth in the region. The shared currency dropped against the yen for the first time in 7 days as technical indicators showed that the euro advance was too fast. The decline also came as European Finance Ministers prepare to meet today and Angela Merkel, the German Chancellor, visits Greece tomorrow for the first time since the debt crisis erupted.
According to Thomas Averill, a Sydney-based Managing Director at Rochford Capital, there is a high probability that the next three to four months will produce bad news from Europe since economic fundamentals are lackluster. He predicted that the euro may drop to $1.20 by the end of the year. The 14-day relative strength index for the euro rose to 68 by the end of last week, nearing the 70 level which indicates the currency is overrated. A German industrial production report expected to be released today is projected to show a decline of 0.6 percent in August.
The euro-zone finance ministers are meeting today where they are projected to discuss situation in Greece as it seeks to authorize the next bailout payment for the country. German Chancellor Angela Merkel is expected to show strong support for Greece’s participation in the monetary union. Ray Atrill, a Foreign Exchange Strategist in Sydney at National Australia Bank Ltd., said that Merkel’s support for Greece will be seen as positive for the euro and may push the euro higher against some major peers.
The euro has dropped by 0.5 percent against the dollar to trade at $1.2977 today in London. The currency dropped by 0.6 percent against the yen to trade at 101.96 yen from the 102.80 yen it traded at the close of the week last week. The dollar has weakened by 0.1 percent against the yen to trade at 78.56 yen.