7 Reasons why the Euro is Rallying

Since early-mid June, the Euro has been in a fairly aggressive uptrend, after nearly six months of losses.  Below, Forex Club's Head of Currency Research, Andrei Tratseuski, lists seven fundamental reasons why confidence in the Euro has grown.

1. Sovereign debt in Europe is no longer a problem. Investors believe that the PIIGS are no longer in extremely volatile state. The reason to the following is the backing from the IMF and the Union itself.
2. Credit Default Swaps started to narrow between weaker nations and ever important German treasuries. The following presents a good scenario for the weaker nations as financing their debt becomes easier.
3. Markets have turned from sovereign debt issues in Europe to weaker data in the United States. Naysayers believe that stimulus inflated economy will no longer perform at an appropriate rate. Double dip recession thoughts are in the air.
4. Spain had a very successful bond offering, which calmed down the markets.
5. Short squeezing of futures and spot of Euro. IMM data still shows a negative a net short of 73,670 futures contracts in the Euro, which will eventually be covered.
6. Tight liquidity in the Euro-zone banks is beginning to wane. Banks are able to get funded almost without a problem.
7. Stress tests for Euro banks. If you recall, stress test of banks in the United States became among one of thee catalysis’ which sparked confidence back in the markets and slowly pushed the economy out of recession.

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