It seems that the ECB (European Central Bank) action of boosting the euro zone is losing its influence with euro prices going down for the first time in the last three weeks. Dollar and yen gained strength against the euro and this signals the uncertainty surrounding the ECB action to revive the monetary situation in the euro zone. This also points out that investors are least convinced about the ECB’s plan to put a control on deteriorating European debt crisis.
The European economic revival program got another jolt from the Chinese and German data that hit the Australian and Canadian dollars. The Chinese exports rose unexpectedly and knocked down the efforts focusing on global economic growth. These developments worked in favor of boosting the dollar and the yen while the commodity-linked currencies like the Australian and Canadian dollars suffered a setback.
Just a week ago, the ECB President Mario Draghi had made an announcement that the ECB will take all possible steps to control the situation of the debt-ridden euro zone. He hinted on buying bonds of the economically ailing European nations to reduce the borrowing costs. Following the announcement, the euro had recorded a record rise against the dollar. Consequently, investors focused their attention on the euro trading, but after a week-long positive sentiment, investors are again found returning to safe currencies like the dollar and the yen. As a result, euro posted a decline while the dollar and the yen gained strength. From a one-month high of $1.2443, the euro declined $1.2290 and recorded a 0.1 percent fall. At the same time, its value stood at 96.21 yen, posting a 0.5 percent loss. Overall in one week, the euro suffered a loss of 0.8 percent versus the dollar and 1.3 percent against the yen.
This fall in euro prices has raised a doubt about the ECB plan and investors began to realize that the proposed ECB plan is far from bringing any positive results in the troubled European countries. Experts feel that the market will hardly be convinced of the ECB action unless the euro zone’s rescue funds are utilized. But the German Constitutional Court is imposing impediments in activating the permanent ESM fund and consequently the market is suspicious about the revival of the economic conditions of the stressed countries in Europe.
The German lawmakers are expected to take decisions on the ESM fund on September 12 and till then the market is supposed to be under dilemma. Any ECB action may not bring the intended results till the September 12 German verdict, reveals the market sources. Amid such speculations, the market participants will likely to be disappointed by the euro’s market movements. In such a scenario, all eyes are now set on the German Courts and the country’s policy makers whose positive moves will determine the euro’s fate post second week of September. Investors are also looking ahead to the next week’s euro zone economic output, which may force the ECB to cut interest rates and strengthen the euro.