The Euro is going through a nice rally over the past week or so. Today, it even achieved a two-month high versus the US Dollar.
The gains in the Euro are the topic of today’s post and I want to share 3 possible reasons of why the European currency is rallying and why the Greenback seems to be wavering.
1. The Egypt Situation Is Calming Down
The past few weeks, the entire world was riveted by the images of the popular uprising in Egypt.
Among talk of democracy and human rights, there was (and to an extent is) great fear that this crucial country will destabilize and perhaps turn into a quasi-Iran like nation. Certainly, any turmoil in the country through which the Suez Canal flows is enough to send oil prices rocketing and creates a lot of uncertainty and fear.
Well, Egypt seems to be stabilizing. President Mubarak has been ousted, protest had dwindled, and the army seems to have taken control of the country. While the future of Egypt is still unclear, for the time being, things seem to have stabilized. This means that people are flocking less to the Dollar and are looking for other currencies to invest in, one of these being the Euro.
2. The growth reports of Germany are encouraging.
The Eurozone’s biggest economy is leading Europe in growth data for 2010 and sentiment within Germany is also positive.
Germany truly sets the tone for the entire Eurozone, so good news about it make the Euro a much more attractive currency.
In addition, it’s been a long time since we heard of major economic problems in any Eurozone member. While Greece and Ireland did require a bailout in 2010, other troubled Euro members seem to be holding their own… at least for the time being.
3. Stocks Are Rising Dollar Falling
It’s been this way (for the most part) since the crisis of 2008: the Dollar is considered a haven currency. People go to it when things look scary.
Good economic data in the US along with reports of high earnings by major companies create a positive atmosphere in the markets. At the moment, fear is lowering and so the attraction of the dollar is weaker. The Euro is the major beneficiary.
Will this trend continue? Only time will tell. The situation in Egypt is fragile. Things can change quickly.
