{"id":7950,"date":"2010-03-25T07:40:17","date_gmt":"2010-03-25T11:40:17","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=7950"},"modified":"2010-03-25T07:40:17","modified_gmt":"2010-03-25T11:40:17","slug":"euro-under-pressure","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/03\/25\/euro-under-pressure\/","title":{"rendered":"Euro under Pressure"},"content":{"rendered":"

By eToro<\/strong> – Euro fell under major support levels amid failure of EU members to conclude a rescue plan for Greece. Germany the largest economy in the EU is strongly opposing any sort of a Greek bailout. Latest polls show a large portion of Germans not only opposes any sort of a Greek bailout but actually think Germany is better off without Greece in the Euro zone. With the EU strongly divided ahead of the EU summit on Thursday and Portugal\u2019s credit downgraded by Fitch to AA- , investors crowded heavy bids on the Euro pushing it below the 1.34 support against the Dollar and to an historic low of 1.423 against the Swiss Franc. Many other members of the EU are under debt watch such as Spain Portugal and even Italy, and investors\u2019 willingness to pay a premium for the Euro against the Dollar is starting to fade.<\/p>\n

Lack of a safety net, a long term risk for Euro zone growth –<\/strong>The failure of EU members to create a funding safety net not only poses a risk for the Euro exchange rate but for Euro zone economic growth. Since investors have a lack of clarity and feel the Euro zone is unable to be flexible enough to address its debt problem in an orderly manner, spreads on various bonds of EU members are widening. This brings borrowing costs for governments in the Euro zone to surge. For example the spread between Greece\u2019s 10y borrowing costs and Germany\u2019s 10y borrowing costs is 3%, meaning Greece\u2019s borrowing costs are close to two times that of Germany, as German 10y bunds are yielding 3.25%. Now with Portugal credit downgraded and Greece possibly forced to get an IMF load, many EU members that need to rollover vast amounts of debt could suffer the same surging borrowing costs. What is the effect of such a process? Inflation could spike in the Euro zone which could cause the ECB to prematurely raise rates and bring EU growth practically to a standstill. Moreover since investors in the future will not be confident on EU stability, EU members will have to earn investors\u2019 trust by curbing deficits too rapidly and this is of course also negative for growth and risk a double dip recession in the Euro zone. Unless EU members will be able to create a long term solution and a safety net for the EU high debt nations, investors\u2019 belief in the Euro Zone will fade and with it any chance for the EU to gain a stable economy and exchange rate.<\/p>\n

Daily Forex Market Analysis provided by eToro<\/a><\/strong><\/p>\n

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don\u2019t trade with money you can\u2019t afford to lose.<\/p>\n

\u00a9 2009 eToro Blog.<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By eToro – Euro fell under major support levels amid failure of EU members to conclude a rescue plan for Greece. Germany the largest economy in the EU is strongly opposing any sort of a Greek bailout. Latest polls show a large portion of Germans not only opposes any sort of a Greek bailout but … <\/p>\n

Continue reading “Euro under Pressure”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-7950","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/7950","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=7950"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/7950\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=7950"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=7950"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=7950"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}