Euro Makes Slim Gains Against U.S. Dollar after Portuguese Socialists Admit Defeat

The euro made slim gains against the U.S. dollar on Monday, after the Socialist government of Portugal admitted election defeat. The Portuguese Socialists were soundly beaten by the center-right Social Democrats on Sunday. The elections were called after Prime Minister Jose Socrates failed to gather support for his fourth austerity package in less than a year. Portugal is having a very rough time trying to meet its deficit obligations from the EU/IMF bailout program. Some analysts might think that right-of-center government will be better in implementing difficult and painful social spending cuts, which might be necessary in order to get public spending back under control. The euro seems to be a bit stronger following the government change in Portugal. In Monday's early morning trading, the euro rose 0.024% against the U.S. dollar to trade at $1.4638. At the same time, the euro made bigger gains against the Japanese yen, rising 0.071% to ¥117.56. The euro also found some support in the increasing speculations of tightening of Europe's monetary policy. Even though analysts do not expect ECB to start increasing its interest rates just yet, some analysts believe ECB will send a hawkish message at its meeting later this week and schedule its next interest rate hike for July. While the euro is being boosted by positive news, the U.S. dollar is still struggling to shake-off bad employment data, after the U.S. economy added around 100,000 jobs less than expected in May. Traders who believe the new government in Portugal will be better suited in bringing the country's deficit under control, which will also make it easier for ECB to start raising interest rates again, will be interested in the Market Vectors Double Long Euro ETN URR or the EUR/USD Exchange Rate ETN ERO. Other traders might believe that the election defeat by the ruling party in Portugal will be seen as a sign that Portuguese voters are not prepared to make more sacrifises and are willing to punish any party for making more austerity cuts. These traders might think the new government will be less willing to make painful cuts in order to keep its popularity rating high, which might undermine the stability of the euro. These traders will be more interested in the ProShares UltraShort Euro ETF EUO.