Tuesday, 9 Feb 2010

Euro Rises on Greek Bailout Rumors, But For How Long?

After sinking to an 8-1/2 month low against the U.S. Dollar last week, the Euro began to slowly rise against the greenback in trading today. This was largely due to rumors that the European Central Bank will soon move in with a bailout for Greece, a country racked with high deficits. Currently EUR/USD is trading around the 1.3765 level, up from 1.3698 earlier today.

Despite the Euro gains, analysts have been quick to warn that this trend is likely to remain weak and temporary. Risk aversion is still the overwhelming sentiment among investors. High risk currencies like the Euro and Aussie may be adversely affected, especially after the strong American economic indicators of the last week. Furthermore, it appears that in addition to Greece, both Spain and Portugal are facing looming crises with their respective deficits. This is likely to negatively impact the Euro in near future trading.