Euro Steadies As IMF Calls For More Fiscal Space For Greece

Euro Steadies As IMF Calls For More Fiscal Space For Greece - Euro banknotes, puzzle
Bill Cascade   NEW 30/09/2019 00:00:00 Forex

The Euro is trying to bottom out after plunging to two-year lows. The 1.0930 level, against the Dollar, has emerged as a crucial support level from where the embattled currency has held steady after coming under immense pressure. Weak economic release from some of the biggest economies in the trading block has continued to pile pressure on the currency, on fuelling economic recession concerns.

IMF Greece Stance 

Weak economic data from Germany, France, and Italy has gone to fuel weakness in the Euro against the US dollar as well as the Yen. Brexit Uncertainty has also triggered concerns in the financial markets as Britain struggles to iron key issue with the EU that will set the stage for Brexit.

A report by the IMF indicating that Greece might need more fiscal space to achieve economic and social recovery is another emerging issue that could trigger renewed weakness on the Euro. According to the IMF, Greece government and EU partners must reach an agreement on a lower primary balance path if the country is to achieve a 3.5% GDP output for the next three years.

To achieve a 3.5% GDP, Greece might have to restrain from cutting public investments. Instead, the country must try to improve its sales-tax regime as well as broaden its tax base if it is to create more space for social policies.

The IMF expects Greece economy to grow by 2% over the next years. However, the fund believes it could take more than ten years for the country’s per capita income to bounce back to pre-crisis levels.

Euro, AUD, NZD Weakness 

Greece economy is not the only one weighing in on the Euro strength. A slowing German economy has emerged as one of the biggest threats given the size of the economy. The Euro has struggled to break out of a poor run, on weak German economic data.

For instance, retail sales in the previous month plunged to 3.2% from an upwardly revised 5.2% recorded in July. Inflation data on Tuesday and retail sales on Thursday are some of the much-awaited data that will affect the Euro direction of trade against other major currencies

Disappointing economic releases could set the EUR/USD on track to record a third consecutive month of losses having plunged to the 1.0932 against the Dollar. The EURO lost 2.58% against the Dollar in July and 0.79% in August. 

Just like the Euro, the New Zealand dollar is also under immense pressure after a recent survey showed weakening business sentiment which has dropped to an eleven and half year low. The slowdown is already fuelling suggestion that the country’s central bank will carry out an interest rate cut.

Australia is also staring at yet another interest rate cut as part of a policy that seeks to reinvigorate the struggling economy. The British pound, on the other hand, has steadied at the 1.2297 level against the Dollar as the Brexit standoff continues to drag on as the October 31, deadline looms. 

 

 

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