Wednesday, 8 Sep 2010

Forex News: EUR Straining Under Renewed Debt Concerns

The euro dropped against the majority of its currency counterparts today as sovereign debt concerns returned. The bank stress tests performed over the past few months showed data favorable to the region, but new reports have highlighted the inherent weakness of the tests to apply ample strain to the banks, which led to misleading reports.

Weak German industrial figures lately have also weighed on the 16-nation single currency. It appears that the euro zone's strongest economy may be experiencing the start of a slow-down in recovery and this is having a direct impact on the strength of the EUR. This has combined with more speculation that European banks may yet have to seek more capital.

However, even if depressed risk sentiment is likely to prevail, there could be some relief later in the day if the Bank of Canada (BOC) surprises the market with a rate hike, or if the latest U.S. Beige Book gives a more upbeat assessment of the U.S. economy than analysts have been anticipating. Either event could bring traders back into riskier assets, boosting the euro.