Euro’s Recovery Was Short-Lived, Further Declines Expected

The euro’s recovery proved to be short-lived as was signaled by the euro’s decline today against U.S. dollar and other most traded currencies; the speculation suggests that that the central bank will keep the interest rates at the current record low level, causing concern for the performance of the common European currency.

The European Central Bank may keep the main refinancing rate at 1 percent to help the struggling European economies, causing speculation that the euro will continue its decline against the dollar as the Federal Reserve is going to raise the interest rates. Ireland, Greece and Spain have worst budget deficits: 14.3 percent, 13.6 percent and 11.2 percent of gross domestic product respectively, compared to the EU target of 3 percent.

The rescue plan may bring some short-term support for the euro. Yet the analysts think that in the long term the rescue may cost too much for the EU and bears too many negative effects and complications. The forecasts for the euro’s price range from $1.20 to $1.35.

EUR/USD traded at 1.2726 as of 17:39 GMT today after opening at 1.2784. EUR/JPY traded near 118.35 down from the opening rate of 119.26. EUR/CAD traded at about 1.2945.

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