The growing confidence and excessive evidence of slowing down US economy is driving the Euros now.
Every one got a bit too excited about the idea the euro-area was going to break up and forgot that the US has a whole load of problems of its own,”
Germany leads the way by enforcing Fiscal Balance and tightening spending in the euro, after the EU countries in the region announced budget cuts and the European Union crafted a E750-billion ($970 billion) financial backstop in May to forestall defaults. Spain, Portugal, Ireland and Greece successfully auctioned more than E17 billion of bonds and bills since July 13.
Speculation the recovery would accelerate increased when Germany’s Ifo institute said July 23 that its business climate index unexpectedly jumped to the highest level since July 2007. A composite index of European services and manufacturing industries climbed to 56.7 in July from 56 the month before, London-based Markit Economics said a day earlier.
Even though highly suspicious on the release of the recent STRESS TEST Report, Investors showed little surprise on July 23, when the ECB Officials said seven of 91 EU banks subject to stress tests failed with a combined capital shortfall of only E3.5 billion. The euro rose 0.2% to $1.2933 as of 8:48 am in London, after appreciating in three of th only e past four weeks. The 16-nation currency appreciated 8.9% since June 7, when it slid to $1.1877, the weakest level since March 2006. It also advanced 2.5% since falling to a more than seven-year low on June 29, according to Bloomberg Correlation-Weighted Currency Indexes.
We have now a reversed Outlook on EURO/USD Citigroup’s euro, region economic surprise index reached a three-year high of 131 on May 27. The equivalent US gauge fell to a 16-month low of minus 43.6 on July 1. The measures examine historical standard deviations of data surprises by comparing releases with Bloomberg median estimates | |||
| Goldman Sachs analysts reversed their outlook for the euro twice in two months, and said in the most recent forecast that the dollar will weaken against the euro by January as US growth slows. The New York-based bank says the shared currency will reach $1.22 in three months, $1.35 in six months and $1.38 in a year. The main positives for the euro have been stronger-than-expected euro economic numbers and a recovery in risk appetite.However, we still insist that while US growth has slowed more than forecast, the economy will still outpace Europe over the coming year as budget cuts start to brake the recovery The US economy will expand 3.1% this year, according to the median of 55 analyst forecasts compiled by Bloomberg. The euro-region will grow 1.1%, a separate median estimate shows. German Chancellor Angela Merkel’s Cabinet approved four years of budget reductions and revenue programmes worth E81.6 billion on July 7. Greece aims to cut its budget deficit to 8.1% of gross domestic product this year, from 13.6% in 2009, and meet the EU’s 3% limit by 2014. Portugal plans to reach the EU target by 2012, reducing it from 9.4% last year. The euro-region deficit will narrow to 6.1% of the GDP in 2011 from 6.6% this year, according to European Commission forecasts on May 5. The US gap will hit 10% in 2010 and 9.9% next year, the figures show. While European governments are pruning, US President Barack Obama signed into law a $34 billion extension of unemployment benefits on July 22. As I am a strong advocate for Fiscal Balance, Any country which can EARN more than her Spending, then her respective currency strength will be awarded by All investors. AND unfortunately, US is out of this category. The FED is now printing the Dollars 25 Hours /Day. For Europe, it may be painful in the short-term, but they are dealing with it. The US, which has a much bigger problem, isn’t even beginning to deal with it. Summary: NEAR TERM, EURO/USD Shall Hover near 1.3500, and by end of this year 2010 to reach 1.4000. | |||
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