Posted June 11, 2010
During the trading session on Thursday, the euro managed to improve, mainly due to the global growth. There were no surprises out of the European Central Bank either, which helped to fuel the improvement.
Stability Fuels Improvement
The euro's rebound during the trading session on Thursday was due in part to the improvement in the mood of investors especially in the area of global economic recovery. The economic data released for the day helped to prove to investors that a global rebound was more likely to be in play. Investors moved to riskier assets on the news, after weeks of trading away these assets, such as the euro.
A Thursday meeting by the European Central Bank also helped to improve the mood of investors as no negative news or information was provided. This helped the market to take in the heavy debt calendar. Auctions are already occurring this week, including those in Ireland, Portugal, Italy. This has contributed to a slow improvement in investor's confidence. Not only did the European Central Bank not move interest rates, but there was no announcement of any negative or significant news out of the meeting from the bank's president, Jean Claude Trichet.
Also important, the euro was able to remain strong even after a decision by German's court system. The court's rejected the challenge that the contribution to the European Union and International Monetary Fund rescue plan, of some $1 trillion, was illegal or unjustified.
By The Numbers
As investors take into consideration the options for moving back to the euro even as a riskier asset, it is important to point out that the euro has fallen by some 16 percent against the US dollar in 2010 alone. However, the stability of the euro during the Thursday trading session may or may not be a sign of a turnaround for the common currency. Investors warned that the euro was still on shaky ground and would likely remain there for some time. Pressure from the euro zone and the debt problems within it is likely to keep the euro from improving steadily.
Nevertheless, the euro was able to move from US $1.1988 as of late Wednesday to US $1.2138, moving past the psychological level of US $1.20 that it has been below for some time. The euro moved from Y 109.28 to Y 110.84. The US dollar moved from Y 91.15 to Y 91.30 for the day. The US dollar moved from CHF 1.1477 to CHF 1.1426 for the day. The UK pound moved from US $1.4530 to US $1.4708. The ICE Dollar Index moved the US dollar from 87.892 to 86.972 for the day.
US stocks gained some 2.7 percent during the day, mostly on higher risk currencies such as the euro gaining.
The Australian dollar managed to improve by 2.7 percent against the US dollar for the day. The Canadian dollar also moved up by about 1.25 percent for the day. Both currencies improved (as they are considered more risky currencies) and because of the positive economic data released for the day.