The euro fell to a year-and-a-half low on Friday, with analysts expecting an even further fall over the remainder of Q1 following the decision by Standard and Poor’s to downgrade the ratings of nine Eurozone countries over persistent concerns over the strength of the single currency and ongoing pressures on significant economies including Greece.
The euro has been subject to weak trading, falling to its lowest level against the dollar in a year and a half in light of the impact of S&P’s decision to downgrade French debt, in addition to that of eight other Eurozone countries in its latest report.
The euro fell to $1.263 before recovering slightly, and was also weakened against the pound as investors feared the worst ahead of S&Ps announcement – an outcome that had been alluded to previously by numerous sources including the French Finance Minister.
Confidence in the euro is at an all time low following the downgrading of French and other European debt, and the ongoing hangover of national debt and large structural deficits across the region is continuing to undermine recovery efforts.
With Italy, Greece, Ireland and Portugal already in need of intervention from external agencies and substantial financial support packages, there is concern that other economies in the Eurozone could fail or require similar bailouts in the coming months. With borrowing becoming more costly for Eurozone countries and credit more difficult to obtain for those with bleak prospects on the markets, Europe remains in hot water.
In addition to raising the costs of national borrowing, domestic borrowing will also be more expensive for consumers and businesses affected by the S&P downgrading, and some analysts are predicting the decision might have a knock-on impact on regional economic growth. Either way it would seem that the Euro’s problems are still in need of decisive, swift resolution.