Thursday, 18 Mar 2010

Greek Deficit Crisis Remains Major Obstacle for Euro

The Euro continued to fall in trading today, following news that Greece is unlikely to receive aid from its fellow Euro-zone countries regarding its deficit crisis. It is looking more and more likely that Greece will have to turn to the International Monetary Fund for a financial bailout. The main obstacle blocking a European bailout package appears to be Germany. Europe's largest economy is wary of making any concrete promises related to a financial rescue. As a result, investors are beginning to doubt whether the Euro-zone has a unified economic policy.

Risk-aversion appeared to be again taking over the market as investors continued to buy up safe-haven currencies, shoring up the greenback and Yen as a result. EUR/USD has fallen some 60 pips since last night and is currently trading around the 1.3670 level. Similarly, EUR/JPY has dropped over 80 pips since last night and is currently valued at 123.35.

Euro-zone news events are somewhat lacking for the rest of the week. The currency's value will likely be determined by a number of U.S. news events, such as this week's unemployment claims figure and the Philly Fed Manufacturing Index. If either of these come in below expectations, investors may be tempted to sell their Dollar positions and return to riskier assets.