Euro Drops in Forex Trading Against the U.S. Dollar Euro struggles in currency trading
The euro is struggling in forex trading as events continue to keep the 16-nation currency weak. Indeed, the euro is down in currency trading on the FX market while the pound actually makes headway against the U.S. dollar -- something that hasn't happened for quite some time.
Euro is struggling in currency trading due to the fact that the ECB's policy statement after yesterday's announcement of keeping rates steady clearly indicates that it will be some time before rates rise.
Additionally, it is not helping matters that Greek workers are on strike again, protesting the austerity plan that the government is trying to implement.
The European Central Bank has kept its benchmark rate steady at 1%. This is unsurprising, given the fact that the ECB cannot afford to raise interest rates in wake of the Greek crisis.
Indeed, even though Greece has decided to implement austerity measures to help get its financial situation under control, the country is far from being out of the woods. The ECB needs to make sure that it is easier for countries like Greece to finance debt.
The euro got a bit of a boost in forex trading on the news, seeing that the euro zone is ready to pull together. However, those gains are gone now, thanks to the fact that the move was wholly expected and not likely to make a lasting impact on the market.
Also as expected, the Bank of England kept its benchmark rate steady at 0.5%.
The euro is firming in forex trading against the U.S. dollar this morning as Greece announces an austerity plan. The announcement of a plan comes despite concerns by the Greek populace with regard to austerity measures.
However, the euro's advance in currency trading has been capped somewhat by the nature of reality. GFT's Boris Schlossberg reports in FX360 on the uncertainty that still surrounds Greek attempts to reign in finances:
At first glance, the Greek plan appears to have made serious progress in addressing the fiscal budget deficit problems that have wreaked havoc on its capital markets since the start of the year and is likely to assuage the ratings agencies who have threatened to down grade Greek government debt below investment grade. However, Greek fiscal officials will still require support from EZ two most powerful members – Germany and France – in order to access debt markets on favorable terms.
With Greece unable to get out of this mess on its own, and with European countries and banks still exposed to Greek debt, it is little surprise that the euro could remain volatile for a while.