LONDON – The Euro surged to higher heights today amid down-beat trades and the dollar recovery. Could this herald more gains against the greenback, (US currency) in the long-term?
The day began with Asian session trading the EURUSD to 1.2685 and then back to 1.2564. One would have thought the German IFO news falling short of expectation have caused an avalanche of euro selling, but the opposite was true euro surged sharply. By late morning it was already over 200 pips up to 1.2775. The pair has since tested the 1.2958. A tall order from when the day began.
Euro Surge Today
What was the reason for today’s rise ? News. Citigroup received a further bailout pledge of $20 billion today. Secondly, President-Elect Barack Obama announcing his Finance Secretary and economic team. These actions resonated positive sentiments across the market place and thus spicing equity markets but not the dollar. Global indices rose sharply today with FTSE-100 clocking almost 10% rise and the DOW by 5% .
What does this all mean to the Euro zone economy? For now, its okay to revel on the euro surge. In the medium-term-long this could hamper the European economic growths and exports. With US economic slowdown already gathering momentum, FEDs interests rate cut becomes inevitable. While such move may put further pressure on the dollar, it also makes the goods and services from other countries more expensive. How the ECB responds to this present euro rise could greatly influence the pain felt across board.
However, the ECB is widely expected to raise its key interest rate cut at its December meeting. Until then, forex traders are waiting to see what clue Jean-Claude Trichet, ECB President would drop on another rate cuts between now and early 2009. For now euro surge continues and let’s trade it.
Trade with caution and protect your capital. Have a great day.
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