Euro Gives Back Gains, Concern Grows

During the Asian trading session, the Euro gave back some of its previous gains as investors consider the political fallout in two of the Eurozone’s largest economies, specifically Italy and Spain. The Euro had surged recently to a 14-month peak against its main rival the U.S. Dollar on investors’ belief that the Eurozone economies might finally be improving, but enthusiasm was dampened in the wake of calls for the resignation of Mariano Rajoy, the Spanish Prime Minister, and growing expectations that former Italian Prime Minister Silvio Berlusconi might be put back in power.

As reported at 12:59 p.m. (JST) in Tokyo, the EUR/USD was trading lower, trading at $1.3494, a loss of 0.2% after sliding 0.95% yesterday; just last Friday, the pair struck $1.3711, a fresh 14-month high.

Despite the current uncertainty, many Euro bulls believe that the dark days of the Euro are essentially over, and expectations are that the Euro, after this correction, will once again resume its uptrend. However, most investors are cautiously optimistic and will wait for the outcome of the upcoming policy meeting of the European Central Bank before placing any more bullish bets. One currency analyst says that the ECB’s recent hawkish stance and a large repayment of the central bank’s emergency loans is leading to some concerns about liquidity, and will be looking to Draghi to take on a less hawkish, more neutral leaning this time around.