Euro Back Above $1.35 On Disappointing US Data
The euro was back above $1.35 on Thursday morning as the debate in Washington continued about the nation's budget. The dollar was under some pressure on Thursday as data due out later in the day is expected to show weakness in the US housing and labor market.
Despite recent strength, most analysts are expecting both the pound and the euro to slide as expectations of the US Federal Reserve's taper come back to light. Economic indicators from the US will be of importance over the next few weeks as investors try to predict the Fed's next move.
In the eurozone, progress on a unified banking system has been slow as some members are hesitant to link their balance sheets to those in the struggling south. On Wednesday, the International Monetary Fund called on eurozone policy makers to create a banking union.
Countries in a stronger financial position, like Germany, have been dragging their feet on banking union plans as pooling their budget resources with their broke neighbors is unpopular among taxpayers. However, according to the Wall Street Journal, the IMF report pointed out that risk sharing doesn't mean that Germany will always foot the eurozone's bills, and in the future it could be on the receiving end.
Although the benefits of a shared budget won't do anything to help with the current economic struggles the bloc is facing, the IMF stressed that immediate action is necessary on behalf of the region's banks. The report suggested that the eurozone should create a centralized fund that can be used to provide temporary financing for failing banks.
With German elections over and the nation's government still hanging in the balance, most are not expecting to see eurozone policy makers acting on the suggestions in the report any time soon. Once Germany has formed its new government, most expect the bloc to turn back to banking union plans.
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