The EURO showed signs of weakening against most major currencies after reaching record highs against more them over the past few months. In more detail, the trigger for this corrective movement in the currency market has been a report showing that the European manufacturing is shrinking and the recession is deepening for the 16 nations that comprise the Euro region.
The euro became yesterday the official currency of Slovakia but its already heading for further declines as analysts expect the European Central Bank to cut the target lending rate from 2.5 percent to encourage spending. The European index of manufacturing fell to its lowest level since the beginning of the data in 1998. The European Central Bank’s basic refinancing rate is expected to be set at the area of 1.5 percent.
The housing downturn has caused a major blow to the UK economy; however Europe is having more gloomy data and a less proactive approach to the handling of the regional financial crisis. There’s no doubt that Europe would eventually be forced to face its dire economic position but it looks like regulators are ready to prolong the crisis in the future rather than take radical measures today postponing the remedy, will not save the world.
So what’s the game? It will win them some time and hopefully for them enough time, to elegantly put the responsibilities to someone else’s shoulders, while saving them at the same time from the trouble of accepting the consequences of any decisions.
Now, its a good time to add some dollars in your portfolio, as there are views between the traders that the USD currency has been oversold whereas the euro will continue its slide in the first half of 2009. The euro is not going to hold on to the 11 percent gain it achieved over dollar last month and it is likely that it will also decline against the following currencies: British pound, Norwegian krone, Swedish krona and yen.
- I am a financial services writer with experience in forex trading and stock market analysis.
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