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Brighter Outlook for Economic Recovery Makes Euro Stronger

Second Week of Gains for Euro, Analysts Continue Forecast Decline

The euro rallied last week despite the grim forecasts. This week the currency extended its rally, most notably against the dollar, against which it rose to the highest level since April. The analysts remained largely unconvinced, though, and continue predict the weakening of the euro.
It’s true that main reason for the euro’s strength against other currencies was the weakness of those currencies. The US dollar weakened after the Federal Reserve signaled about the next phase of the quantitative easing. The Japanese yen lost its strength on the talks about the intervention. The Great Britain pound suffered from the concerns about the possible influence of the budget cuts on Britain’s economy.
While all that is true, some good news from Europe itself also emerged. Germany was the main “producer” of the favorable data as the report about the improving German business climate and the increasing import and export prices contributed the most to the improving sentiment about the European economy. Nevertheless, most analysts think that the fundamentals remain largely depressed and the euro rose for the most part due to the weakness of the other currencies. Therefore, they don’t expect the rally to last long.
EUR/USD rose from 1.3050 to 1.3490 this weak, closing near its weekly high of 1.3493m the highest level since April 20th. EUR/GBP rallied from 0.8334 to 0.8523 after touching the weekly high of 0.8576. EUR/JPY went up from 111.89 to 113.67. This week was the second week of gains for the euro against all these currencies.
If you want to comment on the euro’s recent action or have any questions regarding this currency, please, feel free to reply below.


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