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| Europe |
| Euro at 7 month low as French growth falters |
| 2005-05-21 |
| The euro dropped on Friday to a seven-month low against a resurgent US dollar as French economic growth fell short of expectations and investors fretted about the political turmoil that could result from three critical European votes over the next 11 days. The French economy expanded by a smaller than expected 0.2 per cent in the first three months of the year, increasing concern about the fragility of the eurozone economy. Europe's second-largest economy had been expected to grow by 0.5 per cent in the first quarter. Julian Callow, economist at Barclays Capital, said: "Investors are recognising that the euro does not have a happy set of fundamentals supporting it. The economic news is crumbling and political tensions are rising." The gloomy figures came as opinion polls showed voters in France and the Netherlands were minded to reject Europe's constitutional treaty in referendums on May 29 and June 1 respectively. The treaty, which contains a new set of rules for the enlarged European Union, can only come into force if it is approved by all 25 member countries. The latest opinion poll in France put the No camp in front with 53 per cent. This is the fifth successive poll showing the No vote in the lead, suggesting an earlier rebound by the Yes camp has not been sustained in spite of vigorous campaigning by several European politicians. Economists said market sentiment had also been unsettled by tomorrow's regional election in North Rhine-Westphalia, Germany's most populous state. It is expected to deliver a setback to Gerhard Schröder, chancellor. The euro has tumbled from $1.311 against the dollar a month ago to $1.255 after falling 0.7 per cent on Friday to its lowest level since October. France's economy, previously among the eurozone's best performers, has slowed markedly this year. Italy has plunged into recession. Germany expanded by 1 per cent in the first quarter, although that was seen as an erratic result. With French growth still being hit by oil prices and the delayed effects of the euro's appreciation late last year, economists do not expect any acceleration in the second quarter. Your Arab friends aren't helping you, are they?? On Friday, Wolfgang Clement, Germany's economics minister, joined Italian counterparts in blaming his country's economic weakness on the European Central Bank. Germany had become a "victim" of the ECB's drive for price stability and the bank should take "a very close look" at the country's low growth rate, he said in an interview with the dpa-AFX news agency. The ECB has kept interest rates at 2 per cent for 23 months. Currency traders said the euro's fall was primarily driven by the US dollar, which rose across the board amid continuing talk that hedge funds and other speculators are liquidating dollar carry trades borrowing dollars to buy non-dollar assets as rising US interest rates make these positions more expensive to hold |
| Posted by:too true |
| #4 "French growth" Now there's an oxymoron.... (with the emphasis on the "moron") |
| Posted by: Barbara Skolaut 2005-05-21 22:44 |
| #3 Something got lost in the last sentence. It should read something like speculators are liquidating dollar carry trades, which involve borrowing dollars to buy non-dollar assets, as rising US interest rates make these positions more expensive to hold |
| Posted by: phil_b 2005-05-21 17:15 |
| #2 I wanna see Soros in sackcloth |
| Posted by: Frank G 2005-05-21 15:50 |
| #1 And Buffet loses a couple more million on his $21 billion bet against the $. Gates, too. |
| Posted by: anonymous2u 2005-05-21 12:44 |