FXstreet.com (Barcelona) - The Euro is undergoing a correction
lower in the near term following overnight comments from Chair of
the Eurogroup Junker which displayed increased unease over the
ongoing Euro rebound given its potential negative implications for
economic recovery in the Eurozone.
Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes
that Junker stated that the Euro´s value is now ´dangerously high´
which represents the first high profile attempt by an Eurozone
official to try to talk down the Euro. He feels that the comments
appear to refer specifically to the EUR/USD rate which has
increased from an intra-day low of 1.2043 in July 2012 to a recent
high of 1.3404 following the introduction of the ECB's OMT
programme and Fed's open-ended quantitative easing programme in the
He writes, "Still it is an exaggeration to describe the Euro as
"dangerously high" with the EUR/USD rate only modestly higher than
its average over the last decade. A better overall measure of Euro
strength as noted by ECB President Draghi is the trade-weighted
index which is also broadly in line with its long run average. As
such we can only infer that the Euro appears dangerously high
compared to where Juncker believes it should be trading given the
current weak economic situation in the Eurozone."
Elsewhere, Hardman finishes by noting that the German stats office
revealed yesterday that the German economy expanded by only 0.9% in
2012 implying that the economy likely contracted by around -0.5% in
Q4 2012 The comments will help to dampen Euro upside potential in
the near-term but are unlikely to sustainably drive the Euro lower
unless backed up by ECB policy easing ahead.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.