Rise in German Investor Sentiment

The euro rose against the US dollar and the Japanese Yen on Tuesday as a rise in German investor sentiment boosted stock markets. The euro to dollar exchange rate showed a marked improvement for the euro. Concerns about the European Central Bank’s next moves trimmed the Euro’s gains against the US dollar.

Euro Bolstered by ZEW Report

The euro to dollar rate was $1.2938, up from a one month low of $1.2883. The euro rose 1% against the Yen at 127.75 and the dollar yen exchange rate rose 0.8% to 98.73. The euro to dollar got a boost from the ZEW report which showed increased German investor confidence. The report showed the first positive results since 2007 but many forex traders expect the Euro’s rise to be short lived.

Gloomy Predictions From the IMF

A report by the IMF projected that financial institutions will have to write down $4.1 trillion in assets to achieve global financial stability. Many economists believe the report shows that the global financial crisis is far from over. This report coupled with the uncertainty about the ECB’s future moves has put pressure on the euro to dollar rate. The ECB is expected to cut rates from 1.25% to 1.0% in May but it remains unclear whether the bank will take any unconventional steps like those of the US Federal Reserve.

Investors Waiting For ECB Meeting in May

Investor sentiment towards the euro to dollar rate is not positive. T.J. Marta of Marta on the Markets stated, “If the ECB comes together on quantitative easing, the euro will go down because the U.S. has already started. If they don’t, the euro will be punished because the ECB will be accused of not reacting to the crisis.”  Some believe that the euro to dollar rate could fall to $1.20 by mid 2009. For now investors are waiting for the ECB meeting in May.