No surprises there then: The euro exchange rate is today on the slide as ECB cuts growth forecasts for the Eurozone

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Published on Thursday, 09 August 2012 08:58

Written by Sam Coventry

International Money Transfers at our sister site

On the immediate economic front markets are still feeling the impact of yesterday's news that industrial production in Germany fell in June.

The euro (Currency:EUR) is under renewed pressure this morning as The European Central Bank (ECB) cuts its growth forecasts for next year, saying the eurozone economy is in worse shape than previously admitted.

The euro Australian dollar exchange rate is 0.23 pct in the red at 1.1670 at 9:40 AM in London.

The euro dollar exchange rate is 0.23 pct down at 1.2337.


The euro pound exchange rate is 0.18 pct down at 0.7884.

The ECB predicted that the eurozone will only grow by 0.6 pct in 2013, not 1 pct as previously predicted.

For 2012 a 0.3 pct contraction is forecast, worse than its previous forecast of 0.2 pct.

The ECB said:

"The risks surrounding the economic outlook for the euro area continue to be on the downside.

"They relate, in particular, to the tensions in several euro area financial markets and their potential spillover to the euro area real economy. Downside risks also relate to possible renewed increases in energy prices over the medium term."

On the immediate economic front markets are still feeling the impact of yesterday's news that industrial production in Germany fell in June by 0.9 pct (prior: +1.6 pct, consensus: -0.8 pct).

The trade surplus increased to EUR17.9 bn against expectations of EUR14.6 bn - but the increase was mainly due to an unexpected drop in imports by 3.0 pct m/m while exports dropped by 1.5 pct m/m.

Fitch Ratings affirmed Germany at AAA with a stable outlook.

It downgraded Slovenia to A- with a negative outlook.

Elsewhere, DBRS, a second-tier rating agency, cut Spain's rating by two levels to A(LOW), Italy's by one level to A, and affirmed Ireland's rating to at A(Low). DBRS assigned a negative trend to the ratings outlook of the three countries.

The Spanish government revised its budget deficit targets for 2012 to 4.5% of GDP from the previous plan of 3.5%.

Targets for 2013 and 2014 were also raised to 3.8% and 2.7% from 2.5% and 1.9% respectively.