Eurozone recovers sustainably and Greenback remains weak

06-19-2009 11:01

The single currency did not surpass the 20-Day moving average for the second straight day, while during European trading the Euro traded close to 1.3910. The EUR/ USD pair climbed to a 1.3951 level and found support anticipating on 1.3880 during last night’s trading. However, the pair could remain trading between a taut range during the remains of the trading session, due to the lack of an impulse to restore the decrease suffered previously this week. The economic agenda remained an impulse for a more pessimistic Eurozone forecast, while German producer prices dropped on a yearly basis in May to the weakest level in 22 years.

Well on track for sustainable recovery

German producer prices remained stable in May, but the yearly rate dropped 3.6% versus last year, boosted by heating oil prices falling by 47.4%, as prices not including energy prices fell 2.5% versus last year. European Union policymakers stated that the outlook for a sustainable economic recovery is positive and said that additionally budgetary stimulus measures would not be approved. They continued by appealing for a ‘creditable exit strategy’ to prevent inflationary pressure for the long term as they also assured to help the banking sector, while the financial situation continues to be a challenge. Meanwhile, Lorenzo Bini Smaghi, member of the ECB's Executive Board, disputed that the financial slump increased the need for more control. Expectations for a considerable improvement could boost the Euro further as a result of the ECB limiting the exchange rate, despite that the European Central Bank believes that economic activity will become more stable this year.

Growth outlook remains uncertain

The Pound Sterling climbed to 1.6451 due to the Greenback failing to restore the sell-off earlier this week. The 20-Day moving average remained a major support for the GBP/ USD rally while investors maintain their hopes on the long term for increasing interest rates in the United Kingdom. Mervyn King, Governor of the Bank of England, commented that there are indications for a weakening economic slump, but he also emphasized that it is premature because economic confidence could be far away from recovering. The remarks indicate that the future growth prospects continue its indecisive status, while the region sees the weakest slump in 50 years. Increasing commodity prices could continue to weigh on the real economy, while consumers suffer from a dip in the housing sector together with a deteriorating labor market.

Dollar continued to lose ground

The Greenback fell once more during last night’s trading after risk appetite increased. The US Dollar could continue its fall during the following hours while stock markets point to a higher open for the American market. Rising stock markets could boost demand for higher-yielding assets and the US Dollar could depend on risky tendency, as the economic agenda provides no event risks.