Is That It For EUR/USD? By Nicholas Hastings
The euro is unlikely to make it to a new 2009 high over $1.5060 now.
In fact, even a sustained break over $1.5000 probably won't happen as the single currency continues to lose upward momentum.
Over the last few days there were plenty of reasons for the euro to rally quite strongly. But, the currency's performance has been fairly feeble.
The European Central Bank met last week and hinted at plans to start unravelling the emergency liquidity it has been pumping into money markets to ease credit conditions.
This move could put the ECB ahead of other major central banks in the U.S. and the U.K. in terms of exiting their credit-crunch strategies and ensure that the single currency starts getting support on a yield basis alone.
However, it was the end of the G20 meeting of finance ministers in Scotland that could have really cleared the way for euro bulls. Not only did ministers fail to express any concern about the dollar's recent decline, but also euro-zone officials came out of the meeting showing a wide split over their policy towards the single currency.
Not so long ago, the French presidential advisor, Henri Guaino, said that "the euro/dollar at 1.50 is a disaster for the European economy and industry."
On Tuesday, Dutch Finance Minister Wouter Bos said he never worried about the euro. "We always wanted a strong euro and now we have one. We shouldn't complain."
So, any chances of some official verbal intervention to stop the euro from rising now looks a lot less likely. And, even if some officials did try, their efforts would be unconvincing.
"If those agitating for more concerted action lack the support of key contingents within the euro-zone, then any campaign could well be compromised from the outset," said Neil Mellor, a senior currency strategist with Bank of New York Mellon in London.
In the meantime, strong data from some euro-zone countries, such as Germany, should also have lifted sentiment towards the euro, at the same time that global appetite for risk recovered and made the currency, along with other high-yielders, that much more attractive.
Nevertheless, the euro's attempts at a serious advance have been wooden to say the least, with initial moves over $1.50 proving short-lived and the currency appearing vulnerable to profit-taking.
Chances are that the single currency is suffering not only from extreme short positions by speculators in the dollar but also a rising concern that the recent improvements in the euro-zone economy are too patchy and may prove to be short-lived.
The latest ZEW survey from Germany, the region's strongest and largest economy, drove this point home. Instead of reflecting the recent strong rise in production and exports, the survey's economic expectations index tumbled this month even more than the market had anticipated.
"Earlier enthusiasm is now gradually giving away to realism," said Carsten Brzeski, a senior euro zone economist with ING Financial Markets in Brussels.
There was very little movement in the major currency pairs overnight, with tepid gains in equities dampening market participants' appetite to take on fresh positions ahead of Wednesday's Veterans day holiday in the U.S.
Around 0730 GMT, the euro fetched $1.4982 from $1.4979 in late U.S. trade Tuesday, the dollar was worth Y89.93, up slightly from Y89.84, while the pound was unchanged at $1.6725.
In fact, even a sustained break over $1.5000 probably won't happen as the single currency continues to lose upward momentum.
Over the last few days there were plenty of reasons for the euro to rally quite strongly. But, the currency's performance has been fairly feeble.
The European Central Bank met last week and hinted at plans to start unravelling the emergency liquidity it has been pumping into money markets to ease credit conditions.
This move could put the ECB ahead of other major central banks in the U.S. and the U.K. in terms of exiting their credit-crunch strategies and ensure that the single currency starts getting support on a yield basis alone.
However, it was the end of the G20 meeting of finance ministers in Scotland that could have really cleared the way for euro bulls. Not only did ministers fail to express any concern about the dollar's recent decline, but also euro-zone officials came out of the meeting showing a wide split over their policy towards the single currency.
Not so long ago, the French presidential advisor, Henri Guaino, said that "the euro/dollar at 1.50 is a disaster for the European economy and industry."
On Tuesday, Dutch Finance Minister Wouter Bos said he never worried about the euro. "We always wanted a strong euro and now we have one. We shouldn't complain."
So, any chances of some official verbal intervention to stop the euro from rising now looks a lot less likely. And, even if some officials did try, their efforts would be unconvincing.
"If those agitating for more concerted action lack the support of key contingents within the euro-zone, then any campaign could well be compromised from the outset," said Neil Mellor, a senior currency strategist with Bank of New York Mellon in London.
In the meantime, strong data from some euro-zone countries, such as Germany, should also have lifted sentiment towards the euro, at the same time that global appetite for risk recovered and made the currency, along with other high-yielders, that much more attractive.
Nevertheless, the euro's attempts at a serious advance have been wooden to say the least, with initial moves over $1.50 proving short-lived and the currency appearing vulnerable to profit-taking.
Chances are that the single currency is suffering not only from extreme short positions by speculators in the dollar but also a rising concern that the recent improvements in the euro-zone economy are too patchy and may prove to be short-lived.
The latest ZEW survey from Germany, the region's strongest and largest economy, drove this point home. Instead of reflecting the recent strong rise in production and exports, the survey's economic expectations index tumbled this month even more than the market had anticipated.
"Earlier enthusiasm is now gradually giving away to realism," said Carsten Brzeski, a senior euro zone economist with ING Financial Markets in Brussels.
There was very little movement in the major currency pairs overnight, with tepid gains in equities dampening market participants' appetite to take on fresh positions ahead of Wednesday's Veterans day holiday in the U.S.
Around 0730 GMT, the euro fetched $1.4982 from $1.4979 in late U.S. trade Tuesday, the dollar was worth Y89.93, up slightly from Y89.84, while the pound was unchanged at $1.6725.
- 11 November |
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