Euro Continues to Strengthen

Posted March 04, 2010

The euro strengthened against the US dollar as the EU expresses optimism about a Greece budget deficit reduction plan. The US dollar is expected to continue weakening against the Japanese yen. The Australian dollar rose against the New Zealand dollar. The UK pound is sliding against the US dollar. The Canadian dollar strengthened again as oil and gold prices rose. The Brazil real strengthened on speculation interest rates are going to be increased.


The euro rose again against the dollar reaching a 2-week high at $1.3736 at one point. The US dollar is showing some signs of weakness again as investors operate as if the US Federal Reserve will maintain interest rates at zero to .25 percent.

The euro weakened against the yen to 121.29. The US dollar remained about the same at 88.51 yen though technical data indicates the US dollar is set to continue weakening with US interest rates staying low. Though the joblessness rate is slowing in the US, as long as the economy is still losing jobs, the Federal Reserve is unable to raise rates.

The euro is strengthening as it appears the situation over Greece is defusing. Greece and Germany have exchanged some harsh words over Greece’s lack of fiscal discipline. There is a meeting today between German Chancellor Angela Merkel and Greek Prime Minister George Papandreou concerning the situation, but Merkel has made it clear she will not be talking about an aid package.

The strikes continue in Greece with public workers today over a 4.8 billion euro deficit reduction plan proposed by Greece. The meeting between Merkel and Papandreou is expected to be contentious because Greece is clearly asking for help now after repeatedly saying it could handle its own budget problems.

The European Union did say that the increased taxes and spending cuts proposed by Greece are “convincing” which is a guarded form of support for the plan.

The Australian dollar advanced against the New Zealand dollar to NZ $1.3080 which is the strongest it has been since November 2000. The Australian economy is recovering at a fast pace and its trade deficit is falling at a more rapid rate than projected.

The UK pound is weakening against the US dollar. It has fallen to $1.5113 and the trend could continue. The currency is struggling as the Bank of England refuses to end the asset purchase program. There is an upcoming June election and neither of the main political parties seem to be able to gain a majority as it stands now.

The UK economy is recovering in a manner similar to the US recovery. Jobless benefit claims continue to rise while service and manufacturing indices show economic improvement. The recovery remains week in the UK and economic improvements have been stubbornly slow. New numbers show that the take-home pay rate of growth is at its weakest pace since 2004. As long as consumers have less to spend, the economy will not be able to fully recover.

The Canadian dollar strengthened against the US dollar for the fourth consecutive day to C$1.0313.  Oil rose to $80.89 a barrel. Also rising is the gold spot price to $1,139.76 per ounce.  The loonie is commodity based and the rising prices strengthen the Canadian dollar.

The Brazil real rose against the US dollar to 1.7915 reais per US dollar. The brazil interest rate is expected to be raised by the central bank to attract foreign investments.  Also expected to bring in new revenues is new issue of shares offered by the state owned oil company Petroleo Brasileiro SA.