The cost of insuring Greece and Spain’s debt against default fell today in light of a lack of any new bad news in the two struggling economies. As a result of this, the euro strengthened against the US dollar.
The euro was up to $1.3703 from $1.3663. This was despite a failure among the Group of Seven industrialised economies to agree on a new initiative for resolving the large budget deficit problem in some eurozone countries. In addition, the EU made it clear a bail-out was not on the agenda.
Portugal also voted last Friday to extend its regional council’s spending power, further intensifying concerns about the country’s budget deficit.
Despite these setbacks, European stocks looked stronger as sentiment recovered notably.
European stocks posted gains of around 1 per cent. It was this positive sentiment that spilled over into the euro foreign exchange value today. In fact, this was also reflected in the new Chicago Mercantile Exchange, which showed the net short euro position against the US dollar has risen to 43,700 during the week to last Tuesday, up from 39,500 the previous week.
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