Fiscal Crisis May Spread Across Europe, Dissolving Euro’s Strength

The euro continues its decline on the speculation that the Greece’s budget crisis is worsening and may begin spreading to other countries, as was signaled by the prospect for the decrease of the Portugal’s credit rating.
The Chancellor of Germany, Angela Merkel, said that “the future of Europe and the future of Germany” depends on the outcome of the Greece’s rescue. Axel Weber, the European Central Bank council member, supported the Germany’s contribution to the bailout package and voiced concern that the fiscal crisis contagion is spreading. In the same time, the aid has met the violent resistance in Greece, which already caused the fatal incidents as three bodies was discovered in the building, set to fire by the protesters.
The investors are losing confidence in the euro and are asking: will Greece accept the terms of the package and will the bailout be enough to stop the spreading of the fiscal crisis? The general outlook doesn’t give pleasant answers. The Moody’s Investors Service are reviewing the Portugal’s credit rating for the possible downgrade, the sign that the crisis are already spreading. The debt crisis encourages the global central banks to shift their reserve holdings from the euro to the Canada’s and Australian currencies.
EUR/USD traded today at 1.2855 as of 18:00 GMT after opening at 1.2988. EUR/GBP traded at about 0.8503 down from its opening level of 0.8575. EUR/JPY traded near 120.80.

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