Last week, the Euro traded at its 12 year low at only $1.05. The Euro has made a comeback this week as it traded as high as $1.10 last Tuesday. This surprised the traders who were expecting the Euro to plunge deep and hit par with the dollar.
The Euro’s upswing can be attributed to a glimmer of hope in the European economy as it finds a way to dodge an expected recession last year. A market strategist explained that the European economy is improving as money has been streaming into the equity markets of Europe. This trend led to a correction. Today, many of the short sellers of the Euro denomination are looking for cover and trying to get out when they still can.
The Euro vs US dollar
Last month it was reported by Markit that the business activities in the eurozone has tremendously grown. Growth last February was not seen in the last four years. When the news broke out about the improving eurozone, the euro immediately jumped higher.
Most traders are betting against the euro for the last couple of months. The dollar is the more favored commodity and the rationalization of traders of their actions is quite logical based on the developments in Europe last year.
Traders are expecting for the US economy to do well in the upcoming years and eclipse the euro in the process. Below are three of the factors that traders consider in favoring for the dollar:
• US economy has a bright future and will continue to push to higher highs.
• It is expected that there will be a rate hike coming from the US Federal Reserve.
• It is expected that the money printing program of the European Central Bank will come to the phase of devaluing the worth of the euro.
The expectations set by the traders are now being questioned. The tide has shifted and many investors are already speculating that the forecast on the US Federal Reserve’s rate hike will move at a very slow pace. This will slow down the momentum of the dollar rally.
Market analysts have been optimistic about the euro but they also caution traders not to expect the rallying of euro to go on indefinitely.