Market Overview

Euro Holds On To Gains Despite Soft Data

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The euro held on to Friday's gains against the dollar and traded at $1.3800 at 5:00 GMT on Monday morning.

The common currency has become somewhat of a safe bet for investors who are looking away from the US dollar amid speculation that the Federal Reserve will continue on with its easy monetary policies this week.

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In the week ahead, investors will be looking to the US central bank for clues about when the bank plans to cut back on its $85 billion per month bond buying plan. After surprising investors in September by announcing its plans to continue with the stimulus spending, many expected to see the taper begin before 2014.

However, with the government shutdown and the looming political showdown over the budget in early 2014, Reuters reported that most analysts aren't expecting to see a taper until March.

The euro has become a favorite for those seeking to distance themselves from the dollar, as most aren't expecting the European Central Bank to make any policy changes at its next meeting, despite the currency's growing strength. So far, the bank's board members have shown no signs of concern about the euro's rise. Bank President Mario Draghi previously made it clear that the exchange rate was not a policy target for the bank.

Although ECB members may not be concerned, some worry that the euro's strength will disrupt the region's fragile recovery by making exports from the bloc less competitive. Recent data showed that Germany's business climate index fell below expectations to 107.4. Many saw the survey's results as a preliminary warning about the impact of a strong euro on the bloc's exporters.

Posted-In: News Eurozone Commodities Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga

 

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