Lack of clear policy threatens the EUR
The EUR fell against the USD overnight because investors are concerned about the deteriorating economic situation in Europe. These concerns were heightened yesterday when Germany’s Chancellor Merkel said “I will not allow Germany to participate in any speculation.”  ie : Germany will not promise to offer financial support to those insolvent countries in the eurozone.
Merkel’s announcement caused traders to sell the EUR moving the situation within the Euro Zone from bad to worse. Investors are worried about the financial soundness of several Euro Zone countries including Greece and Ireland and Eastern Europe countries like Hungary and Ukraine. As a result the EUR is declining. Towards 07.00 GMT this morning the EUR stood at 1.2594 USD a fall form 1.2673 USD overnight. Against the JPY, the EUR fell to 118.56 from 119.35 overnight.
Several Central European currencies have experienced a sharp decline in recent weeks because of concerns about the status of the banks in these countries and fears of massive capital withdrawals.The bleak outlook within the Euro Zone is exacerbated because despite these growing concerns, governments have not adopted any significant budgetary measures. There is a lack of clear policy direction which only reinforces concerns about the recession and weakens the EUR.Elsewhere : In the U.S. the dollar was supported by the rise in producer prices in January, increasing by 0.8% compared to December after five consecutive months of decline.
Faced with this situation, the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and a subsidiary of the International Monetary Fund (IMF) have announced a plan to aid the financial systems of Eastern Europe.Â
Towards 07.00 GMT this morning the GBP rose to 88.55 pence against the EUR but fell against the dollar to 1.4222.
The Swiss currency was stable against the EUR at 1.4878 CHF but fell against the dollar to 1.1813.
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The week got off to a good start for the USD as it continued to climb against the JPY. However, later on Monday the dollar began to slow down against the EUR because of numerous speculations that were doing the rounds of the markets. The rumours concern the proposed nationalization circulating of part of the U.S. banking sector. These speculations and announcements, which are expected to continue throughout the week, could have a favourable effect for forex traders for the time being.
“Severe global slump will persist for most of 2009″ this is what the finance ministers from the Group of Seven nations have said this weekend in Rome.
some bad news from Japan yesterday, an unprecedented slump in exports caused Japan’s economy to shrink by 3.3 percent - marking the sharpest fall since the oil crisis back in 1974.

