Euro Posts Weekly Gains, Future Still Uncertain

  June 04th, 2011 at 14:23, Vladimir Vyun

EuroThe euro posted gains against other majors this week as concerns about the European sovereign-debt issues, particularly the situation in Greece, eased, increasing appeal of the shared European currency.

The main drive for the euro this week was the economic data from the US. Attention of traders turned from Europe to America, and what they’ve seen wasn’t pleasant. Meanwhile, the 17-nation currency regained its strength on the back of the US woes.

The news from Europe also gave some support for the euro. Greece convinced the European Union official that the nation will perform necessary budget curs and received another portion of the bailout that was planned last year.

But the story of the European debt is far from over. People in Greece are protesting against the cuts and Moody’s Investor Service downgraded Greece’s local and foreign currency bond ratings to Caa1 from B1 and assigned a negative outlook to the ratings. The agency explained its decision by two factors:

1. The increased risk that Greece will fail to stabilise its debt position, without a debt restructuring, in light of (1) the ever-increasing scale of the implementation challenges facing the government, (2) the country’s highly uncertain growth prospects and (3) a track record of underperformance against budget consolidation targets.

2. The increased likelihood that Greece’s supporters (the IMF, ECB and the EU Commission, together known as the “Troika”) will, at some point in the future, require the participation of private creditors in a debt restructuring as a precondition for funding support.

The fundamental reports from the Eurozone weren’t particularly positive either. The euro has many reasons to go down and the next week may be not as good for the currency as this week.

EUR/USD rose to 1.4633 from 1.4321 this week after posting the weekly low of 1.4256. EUR/JPY rose to 117.46 from 115.62. EUR/CHF advanced from 1.2155 to 1.2199, posting the first weekly gain after five consecutive weeks of losses.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

4 Comments

  1. Gordan Finch

    Gold is in deep water and could lose buoyancy the US and EU debt positions are now contagion. News that Portugal’s Finance Ministry removed computer hard drives and deleted all previous 6 years files in weeks before election of new Prime Minister hints at fraud. One result of the new Prime Ministers austerity measure is that increasing tax rates beyond its already high point will become counterproductive for raising further tax revenue. The EU debts with recent seas of red. Italy combined with Banking and Insurance failure, Spain Ireland and now Portugal imposing Camera only toll roads with huge pre payment and aggresive attitude with heavy fines towards all foreign vehicals. The Greek insolvency then parity with Dollar- July or August appears reasonable.

    Now bricks and mortar are holding good, month on month house price increases in UK with inflation around 8% make Euro and Sterling a sell and buy that order and same for Yuan dollar, but lets see what happens over the week, then sell.

    • Quite pessimistic you are :-).

      • Gordan Finch

        Appears I was optimistic Andrei and on target, like all rivers they eventually find the sea- now Italy and Spain is nearing crisis. Unless the euro is split up into manageable currency area chunks or devalued every bailout they come up with will only shift the problem elsewhere ending up in the drink. Regarding bricks and mortar my position is the same, but then I am not talking about timber sheds, Property will give returns and Gold will be too heavy to float in the not to distant future. What we have is systemic fraud in BANKING AND INSURANCE and my shirt is on the public at large putting this in the spotlight. The example of ZURICH and its AIG UNIT IS A CASE IN POINT.

        • Every way out of the EZ debt crisis involves huge losses for the creditors. And huge losses for creditors mean that the euro risks to go into the ranks of emerging markets’s currencies, except for Europe can’t “emerge” anywhere…

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