Euro On the Move

Posted September 09, 2009

The euro is strengthening as Euro Zone member nations show increasingly strong signs that economic recovery is beginning. The US dollar and yen weakened as investors shed safe haven assets. The Brazil real and Mexican peso strengthened.


The euro is strengthening steadily right now and reached a none-month high when paired against the US dollar.  The euro rose to $1.4535 at one point and ended the day yesterday at $1.4492. The reason the euro rose so strongly was due to an anticipated report indicated that manufacturing in France has risen for 3 straight months by the end of July.

The US dollar, on the other hand, is weakening as investors abandon the greenback for higher yielding assets.  The dollar fell against most major global stocks raising global fears once again that the greenback is set up for a hard fall at some point.  The only thing that could change this scenario is if the US gets a handle on its soaring debt.

The yen also weakened against the euro as Japanese consumer confidence levels rose after a recent election led to a change in the party in control.  The yen fell to 133.79 yen per euro. The yen remained about the same against the US dollar at 92.31 yen.

The Euro Zone could very well enter economic recovery before the US.  There is a lot of uncertainty surrounding the ability of the US to pull out of the recession and its ability to unwind stimulus programs without causing an economic relapse.  There is growing fear the US debt, now over $11 trillion, will lead to rampant inflation as the recovery begins to strengthen.  The US currently has current account deficit that is almost $2 trillion.  Many analysts believe the US will be one of the slowest country’s to pull out of the recession because of the massive spending propping up the economy.

Like France, the UK is also experiencing a slow rise in the amount of industrial production.  July was the second straight month for manufacturing increases in Britain. 

The UK pound strengthened to $1.6558 against the US dollar and held at 87.67 against the euro.  The nation’s GDP rose by .2 percent for June, July and August.   In the three months prior to that the GDP fell by .3 percent.

The Bank of England meets this week and interest rates are expected to be held at a record low of .5 percent.
Australia is experiencing fits and starts in its recovery.  Retail sales for July fell 1 percent when compared to the prior month of June.  Economists had predicted an increase so the falling numbers were a surprise.  One Australian dollar buys 86.33 US cents.

The Brazil real strengthened to 1.8296 real per US dollar on the news China’s car sales are on the increase.  In fact they rose by a whopping 90 percent in August thanks to government stimulus programs designed to increase Chinese domestic spending levels.  At one point the real reached a 3 week high against the US dollar at 1.8215 real.

The Mexican peso strengthened to 13.3569 pesos per US dollar as investors began to invest in higher yielding assets.  As stock markets rise, the peso almost always benefits.  The country is dealing with a 2010 national budget that is 810 billion pesos short.  Unless there are clear signs the deficit can be managed and reduced Mexico’s credit rating will probably be lowered next month.

The South African rand rose to 7.5121 against the US dollar.  It fell against the euro to 10.9436 rand.  The rand is benefitting from increases in commodity prices. 

Poland is expected to have a good chance of being ready to adopt the euro in the year 2014.