Despite a rise in euro, investors are cautious because of ECB uncertainty

The euro rises again moderately against the US dollar but this euro jump however fails to win the confidence of the investors. Investors were seen making small bets and they seemed to be more concerned about the possible outcome following the European Central Bank (ECB) efforts to control the debt situation in the euro zone. An uncertainty gripped the market and investors preferred making small trades.

On the other hand, the ECB denies any report of buying bonds to bail out economically ailing European nations. However, the speculations around the ECB bond buying helped euro to mark a slight rise. It has been expected for a quite long that the ECB will start buying bonds with an attempt to bring down the borrowing costs of the debt ridden European countries, particularly Spain and Italy. Euro, which has slipped to its two-year low value of $1.2040 during the end of July, rose modestly following the reports of the ECB bond buying that gripped the market.

Earlier the German magazine Der Spiegel claimed that the ECB is thinking of setting yield thresholds with respect to buying bonds of the struggling economies of the euro zone. The ECB downplayed this report of the German magazine and this is supposed to act against the euro and restricted it from rising further. The ECB denied and maintained that such a decision has not been taken yet. However, the Der Spiegel report worked in favor of the euro and the speculation that the ECB is all set to revive its bond buying program helped strengthen euro’s position in the market. But this slight jump in euro’s value seems to be insignificant and traders are little susceptible to trade in euro until the ECB takes some concrete steps to bolster the European economic conditions.

Many market experts feel that investors are in ‘wait and watch’ mood and little interested in investing in euro, seeing the ups and downs the currency has reported in the recent times. Experts feel that much will depend on the upcoming ECB actions. However, the ECB sources reveal that the next ECB meeting will take place in early September. The French President and the German Chancellor are also due to meet this week and until some effective decisions are made the market may keep witnessing such trivial events of currency rise and fall.

However, the market experts are lot worried about the German disagreement on buying bonds by the ECB. If German Chancellor Angela Merkel stalls the ECB bond buying program, the efforts to preserve the euro will suffer a major setback. This could be considered as another jolt to revive the economic conditions of the debt-ridden euro zone and the ECB chief Mario Draghi may have to face another criticism who has been striving to revive the ECB’s controversial bond buying program. In such a scenario, the uncertainty will remain the key market feature and any long-term investor will hardly prefer investing in euro. On the other hand, more investors would like to take short euro positions.

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