Euro in 2009

So things are still going slightly insane in the UK – today the news that Barclays’ shares have leapt up by 40% after they released an open letter to investors showing how they are in fact experiencing continued health in the relative disaster that is the UK banking sector. Good news for them (and for the investors) but what is happening over with our European cousins?

The author has been less than kind to some of our peers across the pond – see past blog posts – but let’s be serious for a moment and focus on the currency over there. They have so far been enjoying strength in the wake of the ECB’s reluctance to cut rates. While central banks such as the Bank of England and the Federal Reserve Bank have been slashing rates so far that they are almost unable to go any further, in Europe this has not been the case. So you get the strange situation where the Euro suddenly soars…and yet is the only currency doing so. What that means is that exporters get a lot less interest from foreign investors – in Germany they have had to cut production which has driven unemployment up further.  Currency exchange will be fascinating as confidence in the Euro begins to fall.

So in 2009 the ECB will be forced to cut those rates and this will coincide with the other central banks having eased up on this. The Euro will be a lone giant, sitting amongst the rubble of the world recession, having to pick itself up alone. Not ideal given that the world could do with a bit of fraternity in these times. Barack Obama said it, and Gordon Brown followed suit – we need one another to get out of this crisis. The Eurozone has isolated itself and might suffer the consequences. Interesting times.

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