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Home » Online Forex Trading Blog » Euro – Dollar – It’s Complicated

Euro – Dollar – It’s Complicated

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On a day when the US posted surprisingly strong economic data and when events raised new hopes for Greece, US equity markets seized momentum and ran with it.  At the same time, German – Greece relations took their socio-economic differences to new levels of animosity. 

In Europe, Greece came up with sufficient cuts to meet the euro zone member guidelines.  The ball has transferred to the finance minister of the other 16-euro zone members who could sign an agreement for a 130-billion euro bailout on Monday.  The first tranche would commence in 30 days with a 14.5 billion euro installment that would avoid total and unstructured default.

Thursday was a busy day on all economic fronts.  Moody’s released a report indicating potential downgrades of 17 global and 114 European financial institutions.  The biggest names were Morgan Stanley and UBS but any institution with exposure to euro debt is in red alert.  Nine Danish banks were under pressure. Moody’s is analyzing long-debt holdings and other credit risks related to the euro zone and EU.

Antonio Samaras, the favorite to win the upcoming election for president in Greece was optimistic about the newest of austerity cuts.  This will be Greece’s second bailout since the original 2010 trigger.  This time around, Germany holds the key to the launch and there is bitterness from Berlin.  Originally, Chancellor Angela Merkel drew the ire of Greek traditionalists but that sentiment is now focused on Finance Minister Wolfgang Schaeuble.  

Greece is treading with the hand that feeds them in this exchange.  If Germany votes “no” on Monday, Greece will spiral into unstructured default in 30 days.  Sometimes, it is best to swallow hard and take the medicine.  Germany controls all the buttons in this mess.

US Economic Data Encouraging

In the wake of an astounding approval rating of 10 percent, Congress appears ready to play ball on behalf of American taxpayers.  The joint House–Senate Committee charged with extending the payroll tax cut and unemployment claims is putting a compromise plan together that should pass before another Congressional week-log vacation.

The new legislation doe not include the Keystone XL Pipeline that is much ballyhooed by Republicans.  Rather the finished product will not only extend the tax cuts, but will also extend unemployment benefits for millions of Americans while preventing reductions in payment for services for Medicare patients.  Given the previous Congressional record, analysts were cautiously optimistic about final approval of the legislation.

Could Congress actually conclude legislation without senseless media battles?  In an election year?  Is it possible that even the most influential members of Congress fear for their jobs?  To many voters, whatever Congress does will be too little, too late.

Even the strongest skeptics are encouraged by the relatively strong economic data.  Today, fewer Americans filed for unemployment benefits than at any time in the past four years.  This was another unexpected result and Wall Street was watching.  Equity markets jumped over the 12,900 level as the S&P 500 hit a nine-month high.

Initial unemployment claims dropped 13,000 to an adjusted rate of 348,000, significantly lower than the projected 365,000.  This is the lowest unemployment figure since April, 2008.

More good news came from the Philadelphia Federal Reserve who reported that that its business activity index rose to 10.2 percent, soaring past January’s 7.3 percent.  Orders and shipments showed string gains.  While the region’s employment rate did not rise, the important hours worked figure showed marked improvement.

On another front, housing starts rose 1.5 percent indicating 699,00 unit annually.  Multi-unit starts led the charge and may well support a changing dynamic in homeownership.

Economists were anxious that the 4th quarter growth of 2.8 percent came from inventory sales.  There is speculation that that short-term gain would weigh heavily on the first quarter 2012 economy.

Despite dissenting opinions from the Federal Reserve’s late January meeting, Chairman Ben Bernanke downplayed the possibility of a third tranche of quantitative easing.  The Chairman sited the growing job market as a positive consideration.  The private sector has added more than 200,000 jobs in each of the last four months.  However, 23.8 million Americans are looking for work.

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About the Author -

Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses. Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.

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