Continental stocks have slipped since they reached a two-year high in May, but this may just be a pause for breath. Investors impressed by the eurozone's economic recovery GDP grew by 2.3% year-on-year in the second quarter have started to fret that a strengthening euro will dent growth and company profits. The eurozone is more reliant on exports than other major economies: they account for 44% of the bloc's GDP, compared with around 28% in Britain and 13% in America.
We may hear a lot less about the strong euro in any case over the next few months. The German election result is a reminder that political uncertainty has hardly disappeared from the eurozone, while the European Central Bank is loath to wind down its money-printing programme too quickly. That militates against monetary tightening which implies a stronger euro occurring anytime soon. The euro rally could be largely over: there seems limited scope for it to shoot to the moon.
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