Euro bullish phase on the Forex?

That is the question that torments analysts exchange market last weekend. Despite the movements that have affected the European single currency, especially early in the week slightly down against the dollar and the yen, the currency of the euro area has maintained much against the dollar on the foreign exchange market.

The euro was particularly strong in its growth by the index the most anticipated of the week: the Ifo index. Contrary to expectations, the Ifo index showed a surprise increase for the month of May, stood at 103.5 points against 102.4 points the previous month. This increase in the Ifo index falls in line with good statistics on growth in Germany. The progression of the single European currency on the Forex is explained by the recovery of confidence in economic prospects in the euro area, which has the effect of supporting the European currency. Indeed, with growth that is less bad than expected and a slowdown in inflation, the strategy, both decried, especially by France, the ECB seems to pay.

On the contrary, the dollar is suffering from a loss of confidence, after a transient period of recovery. This loss of confidence is fed partly by the return of confidence in the euro and, secondly, by the uncertainty surrounding the action of the Fed, while the United States is grappling with a rise dizzying price of a barrel of oil and a slowdown in growth. Thus, despite the words of Henry Paulson stressed that the United States are in favor of a strong dollar policy, the dollar has shown a decrease against the euro and the safe havens like the yen and the Swiss franc (see editorial in Friday).

Like the Canadian dollar, Australian dollar expected to soon reach parity with the U.S. dollar on the Forex. Indeed, the Australian dollar reached 22 in May its highest level against the U.S. dollar since 1983, when the exchange rate of the Australian dollar has been stalled in the U.S. dollar. The previous record for the Australian dollar was dated 16 March 1984.

Finally, the yen has not been subject to movements after the widely expected decision by the Bank of Japan by the foreign exchange market. As expected, the status quo was again preferred, although a purely economic point of view, the low level of savings in Japan poses a significant problem for the country. Paralyzed by a political crisis, Japan is still unable to adopt the reforms necessary to get the economy back on track, although Japan has experienced GDP growth in first quarter better than expected.

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