Why The Euro and Dollar Hang in the Balance

Euro and Dollar uncertainty

The recent uncertainty surrounding the impact of Irish debt on other European nations which had pulled the Euro down in the earlier part of last week, has been subsiding in response to announcements from the European Central Bank that various support measures will be extended. There is by no means any certainty that the re-strengthening Euro will last however, with a string of events this week very capable of bringing about volatility. A monetary policy meeting is due in Belgium which may well bring tensions about how to handle rescue packages and sovereign debt between different nations to the surface.

The situation in Ireland will also be bought very much back on to the agenda with the Irish budget due on Tuesday. The main problem is that the coalition Government have only a very slim majority and the recue package from Europe relies on Ireland themselves allocating a significant chunk of their budget to the package – should this not find support in Government, the Euro could well see downwards pressure as the week moves on.

The US Dollar responded particularly badly to a poor set of data on jobs and employment levels on Friday and has continued to slide over the weekend and in the early part of Monday. Where positive news of 130,000 new jobs were expected to have been added in November, only 39,000 materialised. This has raised questions over whether the latest round of quantitative easing from the US will have any impact on employment – one of the most critical areas of the economy – and whether any additional measures will need to be taken.

This week is also one of interest rate decisions from Australia and Canada on Tuesday, New Zealand on Wednesday and the UK on Thursday. Although no interest rate rises are expected, particularly from the UK, the event will typically push back issues such as rising inflation into the mindset of markets with the minutes following the meeting in two weeks time reflecting the split in voting and revealing further insights.

Source: Currency Solutions providers of overseas money transfers for Homesgofast.com