Investor Sentiment Strengthens the Euro
The euro increased to 1.3004 on Tuesday morning, a solid gain after weeks of uncertainty. This came shortly after news from Germany that the ZEW Centre for European Economic Research released data showing that its index of investor and analyst confidence had increased. The purpose of the index is to predict economic change six months in advance, so an increase in confidence forecasts good things to come.
Recent negativity out of Germany, Finland and the Netherlands has caused many to question whether or not the region will be able to repair the damage done to the currency. Reuters reported on Tuesday that an interview with fund manager George Soros revealed that some believe the fate of the region rests on Germany's shoulders.
Without Germany in a leadership role to share the debt of its crisis ridden peers, the eurozone may not have the economic capability to recover. As German finance officials weigh the consequences and timing of issuing euro bonds, the Spanish continue to stir the rumor mill with more speculation about an upcoming sovereign bailout.
According to Businessweek, a senior Spanish economy ministry official has claimed that Spain is waiting for the EU to settle issues with Italy and make a decision about the timing of its payments. Reportedly, Spain has agreed on what it will consider acceptable terms for a bailout, and is ready and waiting to request it.
Between the news of a more positive investor sentiment and a rumored Spanish bailout, the euro has stayed afloat at $1.30. As rumors about Spain are confirmed and denied, investors are expecting to see the euro strengthen and weaken respectively. Should a Spanish bailout loom on the horizon, many expect a risk-on attitude in the market.
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