The Euro has not had the strongest of starts to 2015 with the currency falling from 1.2088 to the Dollar to stand at 1.1815 having been as low as 1.1763 on Thursday. There appear to be two or three reasons underlying the current weakness of the single currency.
The specter of fresh Greek crisis is now center stage because the coalition government failed to get their nomination for Greece's President elected after three attempts. Under the Greek constitution, this has triggered a snap general election which will take place on 25th January 2015. Fears that the left-wing Syriza party could come to power and could derail the EU/IMF bailout terms are forcing the Euro lower. Noises off from Germany are suggesting that they would accept the so-called “Grexit” should the left sweep to power and renege on existing agreements. At home, the election is increasingly being presented as a choice between re-electing the outgoing government and retaining the Euro or selecting Syriza and an inevitable Grexit at some stage down the line (although Syriza stresses it wants Greece to remain within the Eurozone). Without EU/IMF backing, Greece could be insolvent in a matter of weeks.
A second factor driving the Euro lower is the bloc's return to deflation for the first time since the Global Financial Crisis in 2009. The drop of prices in the bloc is largely due to falling energy costs, but it has increased speculation that the European central bank will engage in further stimulus measures to boost the lack-lustre Eurozone recovery. This would mean that the day on which the ECB finally increases interest rates is kicked further into the long grass and this is perceived to make the Euro less attractive to investors.
Lastly, German production and exports dipped in November and imports rose. Exports fell by 2.1% over the October figure and imports climbed by 1.5%. The production figure for November was down by 0.1% over the previous month's level. German factory orders in November also declined by 2.4%. Even so, Germany's trade surplus for November was €17.7 billion.
