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The Euro began 2010 as it ended 2009, trading in a tight range having lost a lot of ground early in December after the US posted a surprise increase in jobs for November. Expectations for December’s numbers were also for a positive number but unfortunately for those concerned, there were 85,000 jobs lost which lead to a weaker dollar. Concerns over Greece’s deficit and ability to repay the debt have been growing recently and Euro buyers were unsettled by comments from ECB executive board member Juergen Stark when he said that the markets were ‘deluding themselves’ if they thought that member states would put their hands in their wallets to save Greece. Retail sales in Germany as well as the Eurozone as a whole were weaker than expected in December, showing that the consumer is still hesitant to spend. The U.S. then matched this release with some disappointing numbers of their own. Retail sales for December showed a drop in sales against expectations for a rise of 0.5%. The ECB left interest rates on hold at 1% and in the press conference Trichet said that the idea of Greece leaving the euro was ‘absurd’. His comments were very cautious saying through the recovery, GDP numbers may be up as well as down. By this point, concerns were growing about what would happen were Greece unable to meet their debt obligations and the Euro hit the lowest point since September. Adding to the downward pressure on the Euro was data from Germany which showed a dip in business expectations, followed by a very impressive 4th Quarter GDP number from the U.S. which printed an annualized rate of 5.7%!The has Euro fallen 4.3% versus the dollar this year as investors bet rising budget deficits in nations such as Greece, Portugal and Spain will hamper the region’s growth, forcing policy makers to keep interest rates at a record low for longer.
The risk is that this becomes even more contagious and it becomes much more expensive to handle this situation. Until there’s a solution, the uncertainty will remain and this will continue to weigh on the euro.

Current Central Bank Rates:
EU (Central Bank): 1.00%
US (Federal Reserve): 0.25%

EUR/USD Highs & Lows of January:
High: 1.4581
Low: 1.3861

A movement of: 5.19%

Difference this would make on €200k

High: $291.620
Low: $277,220

A difference of $14,400
All of the information above can be explained clearly by your personalised dealer should you open a trading facility with HIFX. To discuss your requirements in more detail and for a free currency consultation please contact HiFX plc on 01753 859 159 or email [email protected]

Mark Bodega
Director - HIFX
 
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