German business sentiment beat expectations for a third month in a row, but the good news has been overwhelmed by disappointment over developments in Greece. The latest in the Greek debt saga has Forex traders worried about what’s next, and that is dragging the euro lower, in spite of other news that is favorable to risk appetite.
Indeed, many think that, under normal circumstances, the euro should be improving. Apple earnings in the United States were reported as quite good. Analysts expect that the Federal Reserve will continue a low-rate policy. News out of Germany, the largest eurozone economy, is positive. However, with all of this, the euro is slipping, falling below the 1.30 against the US dollar.
Concerns that the European Central Bank will have to write down its share of Greek debt is weighting on the 17-nation currency. The ECB may be forced into such an action in order to avoid a debilitating default on the part of Greece. Even though a deal was worked out last fall for private bondholders to write down some of the debt, it may not be enough, and the public sector may need to become involved. The fact that the Greek debt problem has been dragging on for years now is starting to wear on Forex traders, and there is no truly palatable solution.
At 14:17 GMT EUR/USD is down to 1.2973 from the open at 1.3036. EUR/GBP is lower at 0.8320, down from the open at 0.8342.
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