The Euro Begins the Week Among Rate Cut Rumors

  on April 22 2013 8:18 AM
Euro Symbol building 2
The euro currency sign is seen in front of the European Central Bank headquarters in Frankfurt. Reuters

The euro kicked off the week trading at $1.30 on Monday morning as investors prepared for the results of a preliminary purchasing executive survey which could force the European Central Bank to cut interest rates at their next meeting in May.

According to Reuters, Markit's composite index based on the results of the survey is expected to remain unchanged at 46.5. The figure is well below the 50 mark, which indicates expansion and will confirm what many believe, that the eurozone's recovery efforts have done little to jumpstart the sputtering economy.

Many are calling for more monetary stimulus, which could be achieved through lowering interest rates. However, as Jens Weidmann, Germany's central bank president has pointed out, the ECB's rate cuts are not trickling down to the countries that need them most. Countries on the southern periphery have soaring borrowing costs regardless of new monetary policy.

Though struggling southern European countries wouldn't benefit from easing monetary policy, Germany may, and to many that is the key to the success of the eurozone. If the ECB does cut its already record low 0.75 interest rate, the euro will become weaker which in turn helps German exports.

Recent data from the eurozone's power house economy has shown that the drawn out financial crisis is taking its toll on Germany. As the biggest contributor to bailout funds and the largest economy in the bloc, keeping Germany strong is essential to the region's success.

With exports being a large part of the country's economy, many are worried that poor data from China and the US means German export growth will deteriorate.

Moving forward, the upcoming purchasing managers indexes will be closely monitored by investors concerned about the health of the eurozone economy and the economies of its trade partners.

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