Euro Struggles To Find Support Following Chancellor Merkel?s Comments Regarding A Greek Eurozone Exit

Modified: Tuesday, 27 March 2012 08:19 BST - Written by Minesh Chaudhari

STORY LINK Euro Struggles To Find Support Following Chancellor Merkel?s Comments Regarding A Greek Eurozone Exit

The Pound Sterling To Euro Exchange Rate is 1.1959.

One currency has dominated the headlines more than any other over the past twelve months, and yesterday’s session in the currency markets proved no exception, as the euro once again caught the eye of the investment community.

German Chancellor Angela Merkel surprised market participants yesterday morning, when she openly discussed the possibility of Greece exiting the eurozone in an attempt to escape the crushing austerity measures which have been forced upon it by the EU/IMF/ECB ‘Troika’. Admittedly, Merkel stated that she thought that a Greek decision to leave the single currency would be ‘catastrophic’ and that the region as a whole would be ‘incredibly weakened’ by such an action. However, the mere fact that the German Premier had countenanced such an outcome was proof enough for many FX professionals to shift out of euro-denominated assets.

Yesterday morning had brought better news for the euro, with the release of an encouraging Ifo Business Confidence survey in Germany. The results of the survey showed that sentiment amongst the German business community had improved for the fifth month in a row, providing further evidence that the eurozone’s leading economy is serenely negotiating a safe passage through the region’s ongoing debt crisis, while other lesser states flounder.

The net effect of Merkel’s words and the German data saw the euro hold its own against Sterling on the day, whilst at the same time breaking into positive territory against the US Dollar. However, the forward move for the EUR USD exchange rate was triggered by a move out of the Greenback, thanks to improved global risk appetite, rather than by any sustained support for the single currency.

Today’s session could see the FX crowd’s focus turn to the US Dollar, with the release of the closely-watched US Consumer Confidence survey for March this afternoon and Federal Reserve Chairman Ben Bernanke speaking later.

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