The Euro gained versus the US dollar in the previous European trading session as the German Constitutional Court rendered judgement in favor of the European Stability Mechanism, the Euro Zone’s bailout fund, clearing the way for Germany to participate in the rescue fund to help troubled Euro Zone economies. Industrial production in the Euro-area likewise helped the single currency as data showed a better-than-expected improvement in July. In today’s European trades, the shared currency is seen to extend gains on speculations that the Federal Reserve would announce another round of monetary easing when the officials meet.
Uncertainties in the markets were erased yesterday when the German court dismissed motions to block the Euro Zone’s rescue fund, and proceeded with the rendering of judgement as to the legality of the ESM. In its ruling, the court said that the ESM is not violative of German laws, and imposed a less onerous condition that Germany should be given veto rights if there is any increase in its current contribution of 190 Billion Euros. The Dutch election likewise lent support to the common currency as pro-bailout parties came on top.
While Europe conquered a major hurdle, the Greenback is likely to come under pressure as the Fed officials are scheduled to meet today and are expected to announce another round of monetary easing which would be detrimental to the Dollar. With anticipations of QE3 very high, the Greenback is seen to extend declines versus the shared currency. As such, a long position is recommended for the EUR/USD pair in today’s European exchanges.
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