The Euro made yet another record high of 1.4163 in the beginning of the Asian trading session. Yesterday we learned that business confidence has suffered greatly as a result of the global turmoil in the financial markets, problems in the US, tight monetary policy in the Eurozone and the high level of the Europe.
Today we see that consumers are also becoming increasingly pessimistic. Even though European Central Bank officials have yet to complain about the strength of the Euro, the impact on the economy is already being felt. Germany, France, Italy and Spain the four largest countries within the Eurozone are not only heavily reliant on exports, but they are also heavily reliant on tourism. France is the most visited country in the world, Spain is number two and Italy is number five (the US is number three followed by China). There have already been reports of decreased interest in European travel and heavy discounting which is a reflection of how the strong currency is already hitting the region?s bottom line. The Euro is hovering not far from its all time highs. Tomorrow we have German consumer prices, unemployment and Eurozone retail PMI which could trigger some Euro driven flows. Meanwhile the Swiss franc is weaker despite stronger than expected leading indicators. This is in line with the market?s recent trend of completely shrugging off any surprises in Swiss economic data.
Written by Kathy Lien, Chief Currency Strategist of DailyFX.com