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Forex Trading: Eurozone Debt Crisis Continues to Weaken the Euro

Posted in Discussions by thotrther on the December 29th, 2011

The euro fell on Monday as European Central Bank President Mario Draghi stressed the risks to Eurozone economic growth arising from the region’s debt crisis and dampened hopes for more aggressive bond purchases that have helped keep yields under control.

An agreement by Eurozone finance ministers to give the International Monetary Fund 150 billion euro’s in bilateral loans to help resolve the debt crisis failed to spark buying in the euro.

Signs of improvement in a European debt crisis and the US economy bolstered the euro but analysts cautioned that unresolved questions about the eurozone’s future could keep the currency vulnerable in coming weeks. Investors can speculate on the popular EUR/USD forex market with firms like IG Markets and Spreadex.

The holiday season has also begun thinning trade, analysts said, which could in turn exaggerate volatility through year-end. An improvement in Germany’s business climate in December, as measured by the Munich-based Ifo think tank, as well as a sharp drop in Spanish short-term borrowing costs boosted riskier assets, with key US stock market futures jumping.

US housing starts also rose to a 1.5 year high in November; a sign the sector could be gaining momentum. The euro fell against the dollar in recent forex trading on worries that the European Central Bank’s new three-year lending program to regional banks will do little to ease their funding problems.

The amount exceeded market estimates that had expected a loan in the 350-billion-euro range. And with financial markets, including the euro, having rallied already in anticipation of the ECB’s lending program, the actual number served as a catalyst for profit-taking.

Some analysts were sceptical that banks would turn around and use the money borrowed cheaply from the ECB to buy sovereign debt of pressured euro-zone nations, such as Italy and Spain.

Data on existing US home sales for November had fleeting impact on trading. Revisions to data for the last four years showed the housing market recession was deeper than previously thought. Traders said the looming threat of eurozone sovereign credit rating downgrades also kept investors on edge and any rally was viewed as an opportunity to lock in profits.

Contracts for Difference Trading and Spread Trades both involve a high degree of risk to your funds, products such as these are margined meaning that it is possible to lose more than your original stake or investment.

When trading via CFD Trading and Financial Spread Trading, please make sure that you only invest using capital that you can afford to lose; before trading ensure you recognise the risk. Please note that Spread Trading and Contracts for Difference Trading might not be suited to all classes of investor. Where necessary, seek independent investment advice.

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