Euro Remains Weak
Following the G-20 Summit in Toronto, euro zone members continued to execute their commitment to concentrate on debt reduction as well as improving financial transparency. While investors have awaited release of the criteria to be used in the much-publicized stress tests, the euro has shown a steady increase against the dollar.
Since falling below $1.19 for the first time in four years, the euro has made a steady push toward recovery. On Tuesday, the currency crossed the $1.2663 threshold and appeared steady despite news that Germany, the zone’s largest manufacturer, reported an unexpected slowdown in factory orders.
Following the G-20 Summit in Toronto, euro zone members continued to execute their commitment to concentrate on debt reduction as well as improving financial transparency. While investors have awaited release of the criteria to be used in the much-publicized stress tests, the euro has shown a steady increase against the dollar.
Since falling below $1.19 for the first time in four years, the euro has made a steady push toward recovery. On Tuesday, the currency crossed the $1.2663 threshold and appeared steady despite news that Germany, the zone’s largest manufacturer, reported an unexpected slowdown in factory orders.
Spain beat the clock Thursday morning by successfully selling 3.5 billion euros in 5-year bonds just ahead of Moody’s downgrade of the credit rating in five of the country’s regions. Surprisingly, the average yield at tender rose just 12 basis points from Spain’s successful May auction.
On Wednesday, Moody’s announced an upcoming review of Spain’s credit rating. The success of the bond auction indicates that investors had already factored in the ratings slide. Standard & Poor’s and Fitch had already downgraded Spain’s rating earlier this quarter, but on Wednesday Moody’s said the rating could fall by as much as two levels.
This weekend’s G-8 and G-20 summits in Toronto were surrounded by aggressive protesters and strong containment by police forces, but inside the meetings an air of cooperation that yielded some surprisingly positive results. The 20 economic leaders of the world’s wealthiest nations are not due to put together a written policy statement until later in the year, but more progress was made at these meetings than was expected.
German Chancellor Angela Merkel who has proven to be Europe’s most powerful and sensible spokesperson may have summarized the meetings best; “This was part of the final communiqué. Frankly spoken, this is more than I expected.”
The Obama Administration was hoping to arrive at this weekend’s G-20 Summit in Toronto with proud financial reform legislation that would showcase the country’s commitment to change. Instead, the reform legislation that was passed by Congress yesterday is an embarrassingly watered down version of the original bill intended to eliminate the possibility of “too big to fail” institutions.
Meanwhile, the European Union members are bringing their own reform packages to the G-20 table. There are significant differences between the euro zone stance and the position of the U.S
