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01/02/2002
Euro struggles on foreign exchanges
The euro changeover may have gone very well for its 12 member states, but the rest of the financial world has not taken to it so well as the currency struggles on the foreign currency markets.
A lot of the speculation on the euro is divested from the optimistic dollar, and growing fears in Europe that market figures indicate swelling inflation. Indeed, the European Commission is expecting inflation to rise to 2.5 per cent for the year to January.
EU officials dismissed the figures suggesting that it was not reflective of the euro's introduction. This is consistent with head of the European Central Bank Wim Duisenberg's prediction two months ago that the euro would not inflate prices in Europe.
On Wednesday the single European currency had posted its biggest ever one-day gain against the pound in early trade, climbing 2.7 per cent to 62.80p before slipping back down to 62.40p.
The changeover was hailed as a success across Europe, with 95 per cent of business transactions in the eurozone being made in euros by the end of January – the low-point being Austria's entire ATM network went off-line as demand euro notes reached fever pitch.
Gwyn Hacche, economist at HSBC, said: "Over the coming months we think core inflation will come down a lot, reflecting weakness in the economy, including consumer spending. This should allow the ECB to cut rates by a quarter or half-point in the second quarter."
The European Central Bank's governing board is due to vote on Thursday on whether or not to change interest rates. (GMcG)
A lot of the speculation on the euro is divested from the optimistic dollar, and growing fears in Europe that market figures indicate swelling inflation. Indeed, the European Commission is expecting inflation to rise to 2.5 per cent for the year to January.
EU officials dismissed the figures suggesting that it was not reflective of the euro's introduction. This is consistent with head of the European Central Bank Wim Duisenberg's prediction two months ago that the euro would not inflate prices in Europe.
On Wednesday the single European currency had posted its biggest ever one-day gain against the pound in early trade, climbing 2.7 per cent to 62.80p before slipping back down to 62.40p.
The changeover was hailed as a success across Europe, with 95 per cent of business transactions in the eurozone being made in euros by the end of January – the low-point being Austria's entire ATM network went off-line as demand euro notes reached fever pitch.
Gwyn Hacche, economist at HSBC, said: "Over the coming months we think core inflation will come down a lot, reflecting weakness in the economy, including consumer spending. This should allow the ECB to cut rates by a quarter or half-point in the second quarter."
The European Central Bank's governing board is due to vote on Thursday on whether or not to change interest rates. (GMcG)
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