U.S. Fiscal Cliff Woes Sends Euro Down

The Euro edged off a 1-month peak against the U.S. Dollar during the Asian trading session after comments from one key Republican policymaker in the U.S. put a dent in the fragile optimism that the U.S. fiscal cliff challenge was to be put to rest. According to John Boehner the no progress of any substantive nature has been made within the past few weeks, and the White House has yet to provide any comprehensive strategy for dealing with next year’s budget. Without such a plan, the tenuous recovery of the U.S. economy will be in jeopardy as $600 billion in various spending cuts and tax increases will automatically be imposed.

As reported at 2:20 p.m. (JST) in Tokyo the EUR/USD pair was trading higher at 1.2994, retreating from the 1-month peak of $1.3013 struck earlier in the session. The Euro also found support from the good outcome of Italian sovereign debt which saw yields on 10-year Treasuries fall slightly.

Analysts still see longer term vulnerability for the Euro, however, with Greece’s aid deal one major concern as is the deterioration of various economic data from the region. One analyst believes that the Euro might fall to the $1.24 area by the end of the year, and that is assuming that the U.S. government avoids the fiscal cliff disaster which would help prop up the greenback, and the situation in the Eurozone remains status quo.