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Euro Poised For A Turnaround

ByBenzinga
AuthorBenzinga
Published 10/02/2013, 08:52 AM
Updated 05/14/2017, 06:45 AM

After climbing to $1.3588 on Tuesday, the euro settled at $1.3522 on Wednesday morning as investors awaited the results of the European Central Bank's monthly policy meeting, set to take place on Wednesday rather than Thursday due to a German public holiday.

The euro's recent strength has come from improving data from the bloc as well as the Fed's decision to continue with its bond buying purchases and delay its highly anticipated taper.

Bloomberg reported that the euro has gained 2.5 percent since the end of August, which exceeds the upper level of the 30-day Bollinger band. The data points to a turnaround in the near future and is likely to make the ECB uncomfortable.

Most are expecting ECB Bank President Mario Draghi to reiterate his September 23rd remarks hinting at the possibility of another long-term refinancing operation to help struggling banks. If Draghi does bring up the LTRO, most expect to see markets readjust and the euro lose some of its value.

Italian politics are also becoming a major threat to the euro's success as the government teeters on the edge of collapse. Silvio Berlusconi has called on his party's ministers to resign from Prime Minister Enrico Letta's government, which could take down the already fragile coalition.

Letta has called for a confidence vote on Wednesday at which most are hoping that some of Berlusconi's People of Freedom party members will back Letta, which could allow the government to rebuild and carry on. If the vote goes the other way, the Italian government will likely collapse and take much of the eurozone's progress with it.

By Laura Brodbeck

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