Euro Back in Favor with Greece’s 95% Participation

Currencies are undergoing some serious flux right about now and the Euro is at the center of affairs, not surprisingly. The success of the Greek debt swap deal has given some support to this economy and this support has strengthened Eurozone as a whole. Considering that the Greek financial crisis was punching holes in Euro credibility until recently, this is not an unexpected turn of events. For those who are invested in Euros, things are finally gaining a more positive outlook. 

Dollar Also Strengthens as Employment Improves 

On the other hand, those Forex traders holding Euro- Dollar pairs should also note that dollar fortunes are changing right now. The impact of Fed Chairman Bernanke’s comment about improving economic conditions has not yet worn off. Now, the improvement in employment rate in the U.S., that comes after a huge wait, only serves to strengthen the dollar some more. The Euro- Dollar dynamics are bound to be skewed by this too.

Euro Gaining Favor but Sentiments Still Subdued

The Euro may be gaining favor with risk assets rebounding in the wake of the seeming success of the Greek swap deal.  However, forex traders should keep in mind that investors are still quite wary about exposing themselves to any Eurozone products. In fact, it appears that only when the implications of the swap deal and further developments permeate through to the markets, will the investors have the confidence to make a bold move into Eurozone.

Immediately following the announcement of the above 85% participation in the Greek bond swap deal, there was no speedy movement into Euros which shows that caution is still the name of the game with this currency. Traders appear to be waiting to ensure whether the Euro gains are sustainable before taking solid positions here.

Forex traders also need to watch for signs that Portugal is going the Greece way in the coming weeks. There is some uncertainty about where this nation is heading financially. One thing is clear, though. If Portugal does turn unstable, the Eurozone nations may be flung headlong into a second chain reaction crisis. If this happens the fate of the Euro is bound to be unpleasant indeed!