The Euro has soared to a six-week high against the US Dollar after Greece revealed that it had offered to buy back up to 10 billion Euros in bonds, a move that caused investors to grow optimistic that progress is being made to tackle the struggling nation’s debt problems.
Finance ministers are due to meet in Brussels later today to discuss Greece and the other struggling European nations. Against the Japanese Yen the single currency held a three-day gain. The demand for the perceived riskier currencies has increased as optimism grows that the global economy is showing signs of improvement. Strong manufacturing data out of the world’s top two economies has caused the safe-havens to lose out as confidence led to the purchasing of higher yielding assets.
“Euro sentiment has brightened and there is reason to be optimistic,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “I still can’t help but think that the missing ingredient for sustained gains is some improvement in the economic data out of Europe.”
The gains could be short-lived however, as the debate over the US ‘fiscal cliff’ drags down on investor confidence. President Barrack Obama has run into a wall of opposition from the Republicans. They rejected President Barack Obama’s demand for higher tax rates, and countered with a $2.2 trillion deficit-cutting plan that would trim Medicare and Social Security and cap tax deductions for top earners. The proposal, in a letter yesterday to Obama from House Speaker John Boehner and other Republican leaders, seeks $800 billion in tax revenue in the next decade and would slow the growth in Social Security cost-of-living payments.
The longer the debate goes on the more nervous the markets will become. The cliff’s deadline is for the end of this month. The Americans are running out of time to avert tipping over the edge. The closer to the deadline we get without a positive conclusion to the discussion the greater the chance of the Euro weakening as investors seek shelter in the safe haven currencies of the US Dollar and Japanese Yen.
As of 11:00 am
The Pound to Euro exchange rate is currently trading at 1.2318
The Pound to US Dollar exchange rate is currently trading at 1.6052
The Pound to Australian Dollar exchange rate is currently trading at 1.5403
The Euro to US Dollar exchange rate is currently trading at 1.3031
The Euro to Pound exchange rate is currently trading at 0.8117
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