Saturday, May 12, 2012

Euro Sinks Under Political Weight

Euro is sinking right now, forced down by the political situation in the eurozone. Concerns about what’s next for the 17-nation currency zone are dragging down the euro as Forex traders look for safety, and choosing the US dollar and the Japanese yen instead.

Euro is struggling as the political situation in the eurozone deteriorates. For the most part, the focus is on Greece. The country has been unable to form a new government, and there are already rumblings of another election — and the possibility is being raised that Greece will withdraw from the currency bloc. Even if a government is eventually formed, the worry is that the new leaders won’t adhere to the austerity measures agreed to for the Greek bailout.


But it’s not just Greece that is struggling. The new French President, Francois Hollande, is calling for less austerity and more spending for stimulus. This is an approach that Angela Merkel, the German Chancellor, has already rejected. The relationship between the two largest economies in the eurozone is likely to only become more strained, and overall eurozone leadership is in doubt.

As you might imagine, that makes for a great deal of uncertainty. The euro is suffering because of it, falling to safe haven currencies as Forex traders look for stability.

At 15:21 GMT EUR/USD is down to 1.2980 from the open at 1.3052. EUR/JPY is down to 103.6645 from the open at 129.3850.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

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