Euro Retains Upper Hand, But Sees Limitations

Euro retains the upper hand today, gaining against its major counterparts, thanks in large part to expectations about what the ECB will decide. A policy decision is expected later this week, and there are hopes that the central bank will announce a plan to buy foreign debt in an effort to bring down soaring bond yields in countries like Spain and Italy.

Even with this measured optimism (after all, many are wondering what the ECB can do for the situation), there are some issues that the euro needs to overcome. Some of those issues are the economic fundamentals. The euro area is seeing its highest ever unemployment rate at 11.2%, and there are worries about a recession.

Germany’s economy has been somewhat lackluster, and Germany provides a great deal of support for the eurozone economy. Without a lot of help to prop up the eurozone economy, and with continued concerns about sovereign debt, the euro is still on shaky ground — even if it is higher right now. It could easily pare, or even reverse, its gains in a relatively short period of time.

At 14:03 GMT EUR/USD is up to 1.2279 from the open at 1.2261. EUR/GBP is up to 0.7853 from the open at 0.7805. EUR/JPY is up to 96.0690 from the open at 95.8490.

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