The euro remained on track to cap its biggest quarterly loss on record as the single currency traded 0.9% lower today, back towards 1.0700 against the dollar and edging closer to parity. After a brief rally throughout mid-March, the euro resumed its decline against the dollar, losing just over 11% this quarter. Ongoing concerns regarding Greece’s financial situation have kept the euro under considerable stress since the start of the year and the ECB’s substantial QE programme has ensured pressure remains on the euro.
One plus for a weaker euro has been the substantial performance of eurozone equity benchmarks which have posted their best ever first quarter gains under the euro. France’s CAC and Germany’s DAX are on track to add over 18% and 21% respectively year-to-date and we could see further gains as investors gain further encouragement from a looser monetary policy outlook across the eurozone.
However, eurozone equity markets were paring recent gains today as investors embarked on end of quarter profit taking with the benchmark index in the UK trading almost 1.8% lower despite stronger than expected UK economic data. GDP growth during the fourth quarter of last year accelerated to 0.6% q/q against expectations of 0.5% q/q while the annualised figure also exceeded expectations with Q4 GDP growing by 3.0% y/y against expectations of 2.7% y/y. With export growth accounting for much of the boost the Conservatives under David Cameron have received a much needed shot in the arm in the run up to the national election in May, however, despite headline figures being broadly positive, business investment slipped -0.9% q/q during the fourth quarter of 2014 suggesting a balance economic recovery is still some way off.