Euro eases and stays below its recent 7-week high position

After slipping from its 7-week high position last week, the euro opened up with some better prospects on Monday and stayed closely below the US dollar. After the last week’s retreat, the currency’s upward journey poses as a breather for the investors who have more interest in the currency. Many experts feel that the upcoming events in the euro zone in the coming few weeks will determine the fate of the currency and its upward movement is due to the anticipation of the positive developments in the euro zone. However, many feel that still it will be difficult for the currency to reach anywhere its 7-week high position. Many analysts have predicted that the euro will still struggle this week.

Ahead of major talks amongst the European policymakers, the euro recorded a gain of 0.1 percent and touched $1.2502. Last week, it has touched its peak of $1.2590 which is its highest value since July 4. However, experts feel that the currency will have to struggle a lot to touch its peak again at $1.26.

Last week the euro reached to the peak with the anticipation that the European Central Bank (ECB) will soon take adequate actions to bring down the borrowing costs in Spain and Italy. This common sentiment among the investors in the market helped bolster the euro. However, this week’s slight jump can be attributed to the U.S. Federal Reserve’s policy meeting which hinted about more monetary stimulus and support for the euro.

However, the further growth path will depend on the major events in the euro zone in the first week of the coming month. The ECB’s forthcoming policy meeting is due in early September and all eyes will be set on the meeting and its outcome. The next major event will be the German Constitutional Court’s verdict on the bailout fund meant to control the debt situation in the euro zone. The decision is due to come on Sept. 12. Besides these two major events, experts are also observing the international lenders’ viewpoint towards Greece. Whether these lenders are in the mood of allowing the country to meet its budget targets over an extended period will also be a key development to take the euro northward.

However, the ECB’s bond-buying scheme is getting mixed reactions throughout Europe. While most countries are in favor of the bond buying, Germany seems not in the mood of giving its green signal. Recently, Bundesbank of Germany termed the ECB’s bond-buying as a dangerous drug and seems to be little convinced that the plan would bring the intended results. On the other hand, some German leaders believe that Greece should be allowed to leave the currency bloc. They feel that the nation should be allowed to do so by the next year.

Germany is also supposed to be affected by the euro zone crisis, although. The country’s Ifo business climate index is expected to go southwards for the fourth consecutive month and this points out the deteriorating economic health of the country. In such a scenario, the German opposition of the ECB’s bond-buying may go weaker in the coming days.

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