[/caption]According to Bloomberg Business Week, the Euro has elevated itself over the green back; not since 2009 has the Euro made such rapid gains against the U.S. dollar.
The rise of the Euro is a sign that investors are less worried by the economic situation in Europe. This apparent confidence in the Euro came about because Spain had taken steps, via a bond sale, to sure up its financial house… letting investors and economists know that it wasn’t following the path of Greece, as was projected by many.
Another vote of confidence in the Euro came about because the banking authorities in Europe decided to enact rules and subject their financial institutions to the so called “stress tests,” akin to what took place in America after its banking failures, to assure the investment denizens that its banks are solvent. The Euro is not only trading higher against the green back, but also against the Japanese Yen. Japan, on its part, is trying to foster confidence in its fiscal policies: Japan’s new Prime Minister Naoto Kan has pledged a combination of taxes and cuts to reach his country’s fiscal goals.
All the major currencies, like the British Pound, in Europe gained on the green back because of the pending release of the stress tests results. One might assume that the rise of these currencies against the American currency may be signaling that the “stress tests” results will show that most of Europe’s banking institutions are in good shape. This is the proof why the market is giving credence to the fiscal improvement is the steady rise of its currencies against the green back, which many investors took refuge in the latter as a hedge against the rumors of Spain’s pending insolvency.
The Euro might even increase more against the green back when the actual stress tests results are released after the wonks have gone over the reports with fine tooth combs.
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