By FX Empire.com
The dollar continued its recent losses against the euro on today, hitting its lowest since early December amid optimism for the global economy. The pair changed hands in mid afternoon trading at 1.3420.
The Euros Meteoric Rise
Continuing geopolitical unrest triggering rising crude oil prices and sluggish consumer demand have tempered expectations for a robust recovery, corporate financial reports are solid except for retailers such as Sear and JC Penny, and the European sovereign debt crisis has eased for now, driving the Dow back towards 13,000. Unemployment seems to have leveled out but a surprise announcement from the US Postal services that over 35,000 jobs are on the line, is worrisome for the slow economy.
Despite the positive signs, central bankers have been exceedingly supportive in suggesting that interest rates will stay at historically low levels for the foreseeable future.
An official from the European Central Bank told CNBC that it is possible they will lower interest rates below 1 percent. Inflation is not a major concern of the ECB at this moment.
On the other hand, increased risk appetite has helped the dollar to a 7-month peak of Y80.5 versus the safe haven yen.
In economic news, the German economy contracted 0.2% in the fourth quarter, an updated estimate from the Federal Statistical Office confirmed Friday. Most of Europe is relying on Germany to be the locomotive pulling the region from economic doom
There are tentative signs of stabilization in the euro zone, European Central Bank Executive Board member Benoit Coeure said in a speech that was released by the ECB today.
The central banker added that the economy in the 17-nation currency zone will likely recover very gradually this year. Furthermore, consumer price inflation will likely stay above the 2% benchmark for several months, but then fall back below the target. The Frankfurt-based central bank aims to keep inflation just below 2% over the medium term.
Greece prepares today to formally launch its offer for a long-awaited bond swap that is at the center of its second international rescue in less than two years, a “selective default” — a term used by ratings firm Standard & Poor’s to describe a form of technical default — is likely in store.
Greece’s selective default … looks increasingly well planned out, reducing any potential surprise factor. That helps explain the euro’s ability to maintain its recent range versus the dollar as well as declining volatility.
Perhaps all the events together might just explain the meteoric rise in the euro today. Or just a sigh of relief as investors can put Greece behind for a while.
Originally posted here
