Resolved Question
Why did the euro take an absolute beating today?
9 months ago
Best Answer - Chosen by Asker
Concerns about the health of the US economy surfaced once again as market participants fear the negative effects of the expiration of the government's tax credit program. Remember that the government offers tax subsidies to first time home buyers in an effort to stir demand. This program is slated to expire on December 1, 2009. Demand for home sales could be negatively affected with one less subsidy. On another note, the Bank of America was said to offer new shares for it to pay for the bailout money that the government granted them. Doing so would effectively dilute theirs shares on the market. This news dragged the whole financial sector down with it. As a consequence, investors ran back to the safety of the USD away from the higher yielding assets and currencies like the EUR and other "anti-dollars."
9 months ago
Answers (1)
Well, the EUR wasn't the only one who took a beating today... The rest of the major currencies tumbled when the USD staged a strong rally. The EUR probably had it worse because Germany just reported a drop in consumer confidence, which hasn't seen a decline in fourteen months! The report showed that consumers felt confident that they'll see further improvements in their economy but they doubted whether these will trickle down to their own economic and financial condition. The actual figure was expected to climb from 4.2 to 4.5 but instead fell to 4.0. Plus, the EURUSD has been extremely oversold for a while so what we saw was probably a relief rally by the USD... but, who knows, maybe this could be an early sign of reversal too.
9 months ago
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