Wednesday 11 November 2015

Euro under pressure




The euro fell significantly on Tuesday as a result of the rising political uncertainty in Portugal. Concerns about the stability of another European economy undermined the already shaky positions of the single currency. Yet we cannot speak about association with the situation in Greece, as the fiscal problems of Portugal are more susceptible to correction and stabilization. Moreover, expectations of quantitative easing initiated by the European Central Bank (ECB) will continue to weigh on the single currency. Contrary to the policy of ECB the US Federal Reserve (Fed) tries to exert tightening monetary policy, which would provide support for the dollar.

After the euro suffered a further blow, the dollar managed to advance against a basket of six major currencies. The single currency fell to 1.0674 dollars yesterday. Expectations that the Fed will raise interest rates after nearly a decade, will support the greenback until the meeting of central bankers on 15-16 of December. Against the yen, the dollar recorded a slight depreciation to 123.08 yesterday, while today even fell to 122.73 during the Asian session. This is partly due to the statement of ECB President Mario Draghi that the conference in London today is expected to give more information about the upcoming monetary policy of the institution.

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