source: sxc - Ambrozjo
In the past few weeks, the Euro has been showing signs of strength in comparison to its low points of the year. Let me remind you that the Euro was trading at below $1.2000 for a while and yesterday it managed to rise above $1.2700, though it failed to hold above that level and slipped back down a bit.
The reason for the Euro’s weakness was the crisis in Greece and the fear that other Eurozone members will not be able to pay back their debt. This led to one of the biggest bailout packageds in history, close to 1 Trillion USD to enable Greece to get back on its feet.
Since that time, the news and fear have abated quite a bit, which is the reason for the rebound move that the Euro made. The question is why is it not rising further? Why is the Euro not breaking upward in a much more drastic fashion?
I believe that the reason is that while the imagined catastrophe seems to have abated and fears of horrific drops in value have decreased, the fate of the Eurozone still seems problematic. Investors and traders still recall the surprise and shock the entire system was in when the dire condition of Greece was discovered. No one wants to be exposed to this kind of thing again.
In the other “PIIGS” nations which are in financial troubles (Portugal, Ireland, Italy, Greece, and Spain) there have been governmental steps taken to repair the financial damage they’re now in. However, it takes time to see just how well these steps will do and whether they’ll be enough. In some of these countries, especially those with bigger social nets, these financial steps are causing great political unrest, so no one is absolutely sure they will materialize as some politicians are promising.
So, the Euro did rise from $1.2000 to where it is today as it seemed that the worst was not going to become true. It is now stuck where it is because it’s unclear what the future holds for it. We shall have to wait and see.
