Euro weakens despite ECB bond plan
The Euro weakened on Tuesday, falling 0.2% against the dollar from the two month high it reached on 31st August, which had seen some investors optimistically forecasting that the currency was rallying.
This came after the European Central Bank (ECB) stated that they will be prepared to buy bonds with maturities of up to 3 years. Despite investors welcoming this news, the fall reflects their fears that it may not be enough to contain the European debt crisis.
The fall against the dollar came despite news that US manufacturing has contracted for a third month and speculation of another round of quantitative easing by the Federal Reserve, indicating serious concerns about the Eurozone, even compared to lacklustre performance elsewhere.
These worries are borne out by the Bloomberg Correlation-Weighted Indexes, which tracks the performance of the currencies of 10 developed nations and shows the Euro’s overall activity to date. Despite other currencies weakening – notably the dollar and yen – the Euro’s fall of 4.1% since the beginning of the year is the worst showing of all the currencies tracked.
The implications of online forex trading are evident; there is a deep-seated concern that the situation in the Eurozone is not abating. As the currency is still above some analysts’ estimates for its end-of-year value, many investors fear a sudden drop in value in the coming weeks or months. There is great pressure on the ECB to go through with their bond-buying strategy, with many analysts hinging their estimates for the Euro’s future performance on how the plan plays out.
