Euro Improves to Six Week Highs

Posted July 09, 2010

During the Wednesday currency session, the euro rose to six week highs against the US dollar. The US stock markets helped to improve optimism to spur the euro.


The euro gained steam in the currency markets during the Wednesday trading session. After the US stock market rose significantly during the day, the euro improved as investor sentiment improved. The US stocks were spurred by optimistic data out of the financial sector in the United States. This helped to encourage investors to head to the riskier assets, including the euro.

The equity market improved significantly. The stock market gains have helped to keep the common currency higher. In particular, the stocks showed a rally in oil and other commodities. That led to growth in the currencies commonly tied with global growth. This includes the Australian dollar. During the currency session on Wednesday, the Australian dollar managed to gain 1.5 percent against the US dollar.

Euro Zone Financials

Also helping the euro during the currency trading session was the announcement from European banking regulators about the stress tests that would be occurring shortly. Investors are waiting and watching for these stress tests, which should give some better understanding of the health of the European banking system. It will also help to show investors that the sovereign debt crisis in various euro zone countries will not (or may) infect the euro zone’s financial sector, depending on the outcome. 

The Committee of European Banking Supervisors stated during the trading day that some 91 banks would be tested. The results of those tests are due by July 23rd. Further, the European Union believes that these tests would reveal any weaknesses and financial effect from euro zone debt countries, including Portugal, Spain and Greece. This test will determine if key banks can handle a three percentage point decline in the GDP from the European Commission forecasts for the year 2010 and 2011. However, some investors are concerned as of these tests may not be strict enough to reassure investors.

Also, investors note that the key number for the euro to reach is US $1.2675. It last reached that level in the middle of May. Investors believe, and analysts suggest, that if it reaches that ceiling shortly, that the euro could move to US $1.30 within a few weeks. During the New York trading session on Wednesday, the euro moved as high as US $1.2665. The euro did manage to meet six week highs against the US dollar during the session, as disappointing data out of the US fueled investors to move towards the currency. 

By The Numbers

The euro moved significantly during the trading say overall. The euro managed to move from US $1.2619 as of late Tuesday in New York to US $1.2656 by the end of the trading day in New York. The euro moved from Y 110.42 to Y 110.65. The US dollar moved from 84.076 to 83.775. The UK pound moved from US $1.5142 to US $1.5217 for the day. The ICE Dollar Index moved the US dollar from 84.076 to 83.775 against major currencies around the world.