The euro posted the biggest weekly gain in more than two years as the unexpected optimism of Forex traders about ability of the European leaders to deal with the problems of the region spurred the currency to the highest level in several weeks.
The promise of German Chancellor Angela Merkel and French President Nicolas Sarkozy to find a mean to resolve the debt crisis of the European Union was welcomed by FX market participants, except for bears, of course. The downgrade of Spain’s credit rating by Standard and Poor’s temporary returned pessimism to traders, but, surprisingly, the effect of the rating cut waned very quickly. It’s interesting to see how hopes outweigh the actual bad fundamentals.
Another bullish factor for the euro is the meeting of the Group of Twenty that has started on October 14. The leaders of G20 discuss the debt issues of the European Union and investors hope they will make up some plan to resolve the crisis. It’s unlikely that anything important would be announced after the meeting as the German and French chiefs promised to reveal their plans on November 3, but that doesn’t mean they can’t compose the plans earlier. Of course, the previous G20 meeting showed more talking than acting. Perhaps this time things would be different?
EUR/USD jumped from 1.3389 to 1.3880 and reached 1.3895, the highest price since September 15, this week. EUR/JPY jumped from 102.80 to 107.16, while EUR/GBP was up from 0.8602 to 0.8773.
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