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Eurozone Close to the Final Crisis: Brazilian Real Fights against the Dollar

The last week offered a scenario not very happy for the Eurozone: between various ups and downs of the macroeconomic data of individual countries, the European bourses tried to move away from the lows of the past few weeks waiting for the ECB meeting on the 10th of March.

It was Bloomberg to publish an analysis on the future scenario of Eurozone following Moody’s statement that wrote how a new monetary policy will not be of help’.

According to Bloomberg, the Brexit, the question about refugees, the political instability of Spain and Ireland can be potential triggers of a new, perhaps final, crisis in the Eurozone.

The last month has been the worst for the Euro currency which touched the minimum of four weeks against the US Dollar. A weaker currency should push exports but this has not been the case of Euro.

Although retail sales in January saw a slight increase in consumption, rising on a monthly basis by 0.4% and 2% on an annual basis, the index of producer prices were down on a monthly basis (from -0.1% to -1%) while on the yearly registered a slight decrease of -3.0% to -2.91%.

The PMI services and the composite both registered a slight increase of a few percentage points.

At the moment, there is only Brazil to be worse than Eurozone. Brazilian economy has foundered in 2015, recording its worst result in 25 years. The Brazilian GDP decreased by almost 4% in 2015, recording the worst figure since 1990.

To complicate the overall picture we found the political chaos generated by President Dilma Rousseff implicated in several corruption cases, particularly that relating to the oil giant Petrobras.

The Brazilian Real has depreciated a lot, but after the bad data on the GDP of 2015 has appreciated on the US dollar. The exchange rate USD/BRL fell up to 3.81, achieving a 3.5% gain since the beginning of the month.

Turning to countries whose fate is certainly not in the balance, we can name Australia which saw its Central Bank leaving rates unchanged on Tuesday meeting. The Reserve Bank of Australia has effectively left interest rates at 2%.

The AUD/USD rose to 0.7270 on Wednesday. The Aussie seems in constant progress, thanks to the improvement of the domestic economy. Indeed, Australian GDP has had a good result: the quarterly growth was 0.6% and not 0.5% as expected by financial analysts.

The Australian dollar is part of the so-called ‘oceanic currencies’, along with the New Zealand dollar. These could be one of the best investment opportunities in the international market of foreign currencies, after experimenting for some years a strong bearish pressure which pushed them down to the lowest levels since 2009.

Their depreciation was nearly 50% between 2013 and 2014; therefore, the low prices reached by the two currencies are not going unnoticed by large institutional investors, which have recently begun to accumulate assets denominated in Australian and/or New Zealand dollars.

The current strength of the two currencies is derived from the rise in many commodity prices, such as gold and other metals.

You will never know if it will be just these currencies to make the fortune of many in 2016.

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