Greek budget crisis continues to affect Euro – Loonie down on oil decline

Greek budget crisis continues to affect Euro – Loonie down on oil decline

03-22-2010 09:39

The Common European Currency continued to fall against the majority of the 16 key currencies, due to the fact that the European Union and Greece can’t agree about how the Greek budget problems should be solved, causing traders to evade Euro-priced positions. The Canadian Dollar’s rally ended due to falling commodities prices.

Greek budget problems

George Papandreou, prime minister of Greece, stated last Thursday that he may consult the IMF to solve the country’s budget problems and to put an end to the most intense national crisis in the history of the 16-nation euro area. This resulted in speculations that disharmony among German, Greek and European Central Bank officials may continue to affect the already vulnerable market sentiment with regard to investments in the eurozone. Yesterday, the Swiss Franc was one of the best performers against the Single Currency, as officials of the central bank of Switzerland seriously take into account the option to strengthen the Swiss Franc in order to profit from the weak Common European Currency.

Common European Currency

The European market scenario doesn’t recover easily, and it’s not likely that it will improve in the short term. Greece is not the only EU member state with budget deficit problems, fact which deteriorates the Single Currency’s prospects for the next months, since interest rates won’t stimulate Europe’s Common Currency to improve.

Commodity prices

A negative sentiment once again dominated financial markets due to economic problems in Europe. The Canadian Dollar is strongly influenced by commodity prices, which dropped and thus consequently forcing the Loonie down. Increasing pessimism in Europe put an end to the longest winning streak of the Canadian Dollar. The economic problems in Europe extended to a worldwide scale, which had a negative impact on the attractiveness of equities and commodity goods in North America, which are markets that are strongly associated with the Canadian Dollar rates, forcing the Loonie down.

Canadian Dollar

After such a long winning streak, the Canadian Dollar declined, but this wasn’t the result of statements or concrete measures by Canada’s central bank. This time, the Canadian Dollar was affected by fundamental aspects of the global market scenario.