Euro Responds to Draghi's Reassurance
The euro rose to 1.3009 on Friday morning, nearly meeting its September high of 1.3169. The increase can be attributed to Thursday's European Central Bank meeting where the bank decided to keep interest rates at 0.75 percent, a record low. CNBC reported that after the meeting, European Central Bank President Mario Draghi reassured investors of his commitment to protect the euro by helping weak economies within the region.
The bank's plan to buy government bonds and ease debt in financially unstable countries like Spain has been making news since its announcement. Thursday, Draghi told reporters that the bank was prepared to buy bonds from Spain and that the conditions linked to the bond buying program would not punish the country, but help it rebuild. Though everything is in place for the bank to begin buying bonds, it is still unclear when Spain will request this help. The market remains positive as investors wait for Spain to ask for aid and rally the price of the euro.
The Draghi press conference, coupled with an economic slow-down in China boosted the value of the euro against the dollar, but social unrest in many of the euro zone countries continued to cap positive gains. Although Rajoy's austerity plans are regarded positively by investors, they have been largely unpopular with the Spanish people and protests continued in Madrid and Barcelona. The Spanish region of Catalonia has threatened to seek independence and demonstrations have turned to violence in the streets, causing concern for the country's future stability. Next week could bring bad news for the common currency, as Greece takes the spotlight with its recent struggle to meet the terms of its past bailout. Creditors for the country's loans are becoming increasingly impatient, and officials will examine whether or not the country is doing enough to receive its next installment.
© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.