Posted July 21, 2010
The euro managed improvements against the dollar Monday. Investors wait and watch for stress tests.
During the currency trading session on Monday, the euro managed to inch up against the dollar. Investors were waiting to learn more about the stress tests that the European banks were to undergo as a way to determine if the economic downfall and sovereign debt crisis was interfering with the euro zone's financial strength.
The euro managed to rise steadily throughout the day. The euro was able to move above the psychological level of US $1.30 for the first time in the last two months, late in the week last week. This was due to the confidence investors currently have in the euro zone's ability to improve and strengthen its banking sector. Most investors believe the euro can continue to improve if the upcoming stress tests will show strength here. The stress test results for the euro zone financial sector are due out on Friday.
The improvement of the euro has shown that investors are moving more optimistically, especially since the euro gained last week as well.
Investors also liked the euro more so than the US dollar during the trading session on Monday as the worry of the United State's stalled recovery continues. Federal Reserve Chairman Ben Bernanke's testimony is due to be made in front of Congress on Wednesday, and it will be a sure test of the strength of investors. As they wait for more news about the country's economy, investors are moving against the US dollar. Investors are likely to remain in this position as they wait to hear what Bernanke will offer in terms of clues to the country's economic movements.
Also somewhat important during the trading session on Monday was the Moody's Investors Service cut the credit rating of Ireland. It moved the country from its Aa1 rating down to Aa2. The agency stated that Ireland's debt burden is high. It also stated that the high cost of rebuilding Ireland's banking system will be a factor in the coming months. Also, the country has had sluggish economic growth in the last months. All of this contributed to Moody's cutting of the rate. This played some role in the markets on Monday.
By The Numbers
By late in the day on Monday, the euro moved from US $1.2927 as of late Friday to US $1.2945. The euro moved from Y 111.95 to Y 112.45 for the day. The US dollar moved from Y 86.61 to Y 86.86 for the day. The US dollar moved from CHF 1.0519 to CHF 1.0549. The UK pound moved from US $1.5298 on Friday to US $1.5231 as of the end of trading on Monday. The ICE Dollar Index moved the US dollar from 82.535 to 82.591.
Also important to note is that the Japanese markets were closed on Monday for a national holiday. The currency markets had lower volume than normal. This is even more so since it is the summer season where trading movements are often much lower.