Euro rises versus Dollar and Pound surged to a four month high

05-12-2009 13:01

The Euro rose to a 7-week high versus the Dollar after the confirmation by the European Central Bank that interest rates will remain unchanged. The Pound reached a four month high of 1.5300 due to the fact that the March industrial and manufacturing production exceeded expectations. Manufacturing activity showed the smallest decline in more than a year and fell by -0.1%. Total industrial production contracted by 0.6% while expectations forecasted a -0.9% decline.

Bankruptcy General Motors ahead?

A in China released report showed that urban fixed-asset investments reached a record high in two years and boosted demand for the Euro and high-yielding currencies and stimulated confidence. After this report the Euro rose to a 2-month record high versus the Dollar while during the last few weeks the ECB rate policy boosted the Euro versus the Dollar in the US. A bankruptcy for General Motors is expected according to its executives, as a result of its worrying financial situation.

Will ECB take aggressive measures

There are rumours that the ECB policy makers will not follow the central banks’ example of other important economies which executed rigorous measures, such as in Japan. These measures are stimulating the single currency. A certain level of safety is proved by the unchanged rates, which stimulates traders’ confidence to obtain assets in Euro, which causes the Dollar to decline. Before we see strong indications that the US economy is improving, it is not likely that the Euro will fall below $1.30.

UK trade balance narrowed

The UK trade balance improved to -6.589 billion from -7.250 billion due to decreasing imports which exceeded declining exports. The increase of the situation in China and in the US starts to result in a broad impact which is proved by the increased exports from outside of Europe.