• Dollar remains positive
• Possible strong Euro finish in March
• Creation of a European Monetary Fund gains support
What Are The Prospects For The Euro
Greece has been threatening to play its trump card by asking for assistance from the International Monetary Fund. This would at worst call into question the whole economic foundation of the EU and at least be seen as highly embarrassing for the EU as it as unable to resolve the situation internally.
This elicited a series of supportive statements from France and Germany last week which caused a Euro rally which is unlikely to be undermined by the ZEW Current Situation survey (which gives an indication of German investor sentiment on Wednesday).
The actual form this support will take remains vague however discussions have started regarding the formation of EMF (not the 1980’s band pictured here but instead a European Monetary Fund (a European version of the IMF the international lender of last resort) whilst this will be too late to help Greece now it indicates a recognition of the considerable strengthening of European ties required to rebuild sustainability in the Eurozone.
This will be a complex process but the willingness now to tackle it will provide increased long term strength to Euro value further challenging the pound and maybe challenging the US dollar as a world currency in 2011. Today’s Eurozone employment change figures may stimulate an exchange rate spike if the forecast -0.5% fails to materialise.
Dollars Remains Positive
Wednesdays US interest rate decision is unlikely to increase interest rates but the dollar continued its inexorable rise on the back of US job figures which may indicate that the recovery in the US may be sustained and with Friday’s growth in retail sales from an anticipated 0.1% to an actual 0.3% the number of positive indicators are growing for the US.
Strong US results are creating demand for goods with Japan and China who are using an undervalued yen and renminbi to supply it with imported goods much to US annoyance.
Resource rich economies like Australia are noticing increased demand for their raw materials, many of which are priced in US dollars and on the back of this demand their economy is growing and their currency is strengthening.
One life line that may be provided to sterling may be the housing market, a surge in demand could pull the UK economy back on track by stimulating spending however this morning’s Right Move House Price Index, based on a sample of residential property, came in below expectations at 0.1% for March
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