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Euro at a crossroad
The euro continued its rise on news Spain has exited recession and consumer confidence in the eurozone had improved adding to hopes of a sustained recovery.
Spain's gross domestic product grew by 0.1 percent between July and September and consumer confidence rose to -14.5 points in October from -14.9 points in September, coming slightly below market expectations for a rise to -14.4 points. The reading was the best since July 2011, when it stood at -11.2.
The single currency is now trading close to 1.38 but can it's ascent continue? Saxo Bank's John Hardy says there is nothing to support a euro turnaround, although he does think we will see slowing momentum going into the next ECB meeting on November the 7th which could provide attractive bubbles for dollar gains.
In Frankfurt on Wednesday, the European Central Bank outlined plans to search for and expose all the bad loans and damaged investments lurking in euro zone banks. That effort would be the first step in forcing banks to fix their problems so they can start lending again.
Earlier this month European Central Bank President Mario Draghi passed up the opportunity to attempt to talk the 17-country currency down. Asked repeatedly whether he saw the euro, which was trading around USD1.35 at the time, as too strong, he said that "the exchange rate is not a policy target".
Mario Draghi says the European Central Bank would use all of the instruments in its arsenal to support the euro-zone economy including keeping its accommodative monetary policy stance for an extended period of time.
This could lead the central bank to a looser policy against the backdrop of very low inflation and weak growth in the currency bloc. The ECB aims to keep inflation just below 2 percent over the medium term.
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