The Euro has some stability in today’s trading session after falling heavily in the previous five against its US counterpart over concerns in Italy and the growing yield differentials between the European currency and the greenback.
Yesterday the currency hit a 6 week low after a member of Italy’s parliament noted that Italy should dich the Euro in favor of their own national currency which follows on from speculation that Italy may not stick to the overall Eurozone rules concerning its budget.
“The euro was lifted, as the latest report on Italy’s budget appears to have prompted a bit of short covering following its recent descent on budget woes,” said Koji Fukaya, president at FPG Securities in Tokyo.
“The market was relieved amid signs that perhaps Italy was willing to play by the rules. The Italian budget could recede as a market theme going forward, but that won’t mean the euro can regain its stride, with the dollar enjoying such an yield advantage,” he added
An even bigger problem for the Euro are the Yields on the US dollar which are now approaching 2 percent, while returns on the Euro are languishing at 0 percent and adds evidence to the case, that the Euro is not worth owning at the moment, and we may see further losses as the year unfolds.
Some see the only way the Euro will make any meaningful gains against the greenback is if the European central bank begins lifting interest rates to close the ever-widening gap on interest rate differentials between the Euro and the US dollar, which is unlikely to happen anytime soon.