Bank Guarantees Help Euro to Rise

The European currency rose today at the highest rate in the last three weeks against the U.S. dollar after the European leaders pledged to guarantee bank borrowings.
The euro rose with a pretty large gap from the Friday’s close level against the U.S. currency and rose a little during the trading session itself. Euro declined against the pound, which was spurred by the same news but with a greater force. Against the Japanese yen the euro also opened with a huge positive gap, but during the trading session demonstrated a moderate decline.
The leaders of the fifteen Eurozone countries said that the troubled banks will be bailed out if they show any signs of the crisis. Governments will provide any needed help to the financial institutions to prevent further worsening of the situation.
Current growth of the European currency is the expected reaction to the governments’ clear action. In the short-term it will continue to support investors’ confidence and keep the euro and the pound up on Forex. But in the long-term the bail-out decisions will result in the huge national debts, which won’t serve well for the currency.
EUR/USD rose from 1.3571 to 1.3635 as of 12:27 GMT today after opening this session with the 1.2 percent positive gap. EUR/GBP fell from 0.7924 to 0.7849 after gaining almost 0.8 percent on the opening gap today. EUR/JPY dropped from 137.00 to 136.83, after being pushed up by the gap by 1.5 percent.

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