More Action Needed to Restore Confidence in the Euro

The euro gained slightly against the US dollar on Monday buy is still close to multi month lows as Greek debt concerns continue to pressure the currency. Traders said the euro was helped by a slight rise in risk sentiment but do not believe the gain is sustainable. Investors were also disappointed that the G 7 nations did not issue any statements dealing with currencies during their weekend meeting. EU finance ministers said they would make sure Greece sticks to its budget cutting plans but investors say much more is needed to restore confidence in the euro. Threats by several Greek unions to strike if the budget cutting measures are implemented caused even more concerns among investors. Roberto Mialich of Unicredit in Milan stated, “If equities are in positive territory this will offer some cushion to euro/dollar downside, but it is not a great signal. As long as EMU fears still loom and there is no strong signal from EU authorities that they will do something to tackle the situation in Greece, Spain and Portugal then euro downside potential will remain.”

EU Debt Woes Spread

Investors and traders remain skeptical of EU assurances that Greece’s debt woes are under control. The group of 16 nations sharing a common currency is facing its biggest test after Greece’s massive deficits and public debt spread to Spain and Portugal. European Central Bank President Jean-Claude Trichet expressed confidence in the EU plan buy failed to convince investors. U.S. Treasury Secretary Timothy Geithner said that the EU finance ministers, “made clear to us they will manage this with great care.” Investors are concerned that massive financial help needed to prevent a Greek default would damage the recovery of financial markets. Michael Woolfolk of Bank of New York Mellon said, “What I think is needed is an agreement on behalf of the EU to provide further support for Greece to further ensure that it doesn’t default.”

US Budget Concerns

This week Greece will need to show investors that it can stick to plans to raise taxes and control public wages. The plan is expected to be challenged by civil service unions who will stage a 24 hour strike on Wednesday but the socialist government says it will stand firm. Outside of the Euro Zone concerns about US budget deficits have spiked concerns in financial and currency markets. The US is on track to run a budget deficit of 10.6% of Gross Domestic Product. The US government has spent heavily to address the financial crisis and rescue its economy.

Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate.  In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.