The Euro Climbs as Confidence in the Region is Restored
The euro continued an upward climb on Wednesday morning, opening the markets at 1.3117, its highest level since mid September.
The price increase can be attributed to renewed optimism in the region, largely because of recent news out of Spain. Much to the surprise of many speculators, Spain maintained its investment-grade status from Moody's Investors Service. Reported by Bloomberg late Tuesday night, the news has renewed confidence in the country and supported the currency.
The report of Spain's credit rating came amid rumors of a Spanish bailout request on the horizon, both of which are propping up the common currency. On Tuesday, Spanish officials were rumored to have hinted at the possibility of requesting aid in the near future. While the rumors have neither been confirmed nor denied, the possibility has kept the currency strong and increased the risk appetite in the market.
German data on Tuesday showed an improved investor sentiment, which could foreshadow an improvement in the eurozone economy over the next six months. This was welcome news after many saw Germany and some of the other eurozone creditors like Finland and the Netherlands as resistant to a bailout for their weaker peers.
Now, German officials have made statements indicating that they are ready to scale back their resistance to a sovereign bailout for Spain. Previously, the German government was opposed to lending the country more money after it already borrowed for a large scale banking bailout.
It seems the waters are still rough for the region, as much of the currency's support is based on speculation about the timing of a bailout. However with investor confidence returning, Spain is on the right path to repair. Before a bailout request is made, many believe the country will need to take further steps to restore stability which could take quite a bit of time.
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