The year starts bad for the currency of the seventeen countries of the eurozone (the Estonia with integrated economic and Monetary Union on January 1). The single currency has dropped about 2.7 in one week, sliding under the symbolic threshold of 1.30 dollar at the sitting of Friday (to 1,2916 at the bottom). The euro did more on such levels since mid-September.
The main reason for this relatively violent recession is to improve of the US economy. Employment was at the centre of attention last week. First estimates by EPA on the number of positions created in the private sector have been a very good surprise for the markets. At the weekend, the data of the Department of labour for the month of December were less flamboyant but confirmed the rally. In total, 103.000 positions have been created at the end of the year 2010 and 71.000 in November (instead of 39.000 initially recognized). Especially the unemployment rate decreased from 9.8 to 9.4. This context promoted a resurgence of force of the greenback, the effective exchange rate (i.e. its rate against a basket of currencies) is appreciated by 2.5 approximately on the whole of last week.
Prudent Bernanke
On the eve of the weekend, Ben Bernanke, Federal Reserve boss however tempered the enthusiasm of the players by saying that the decline in the unemployment rate might be slow. The health of the labour market is a critical variable for us monetary policy. Best figures augured less shopping bias on the part of the Fed and thus tend to push the dollar. Bernanke speech has dispelled the idea of a change of position next to the Central Bank.
The weakness of the euro at the beginning of the year also reflects concerns over sovereign debt, especially before a crucial week for the emissions of the peripheral States (Portugal, Spain). "Our indicators show that the investors are betting heavily on the decline of the single currency," says Bilal Hafeez at Deutsche Bank. "While it is true that the questions around the States and banks will dominate in the beginning of this year, it must also keep in mind that in the medium term the dollar may lose steam without engines: as a result, could, as in 2010, find themselves in a market without clear direction for the currency." For Deutsche Bank, it is better to position themselves for sale on the European currency in the first quarter and stand ready to buy when the level of $ 1.20 is in view, in the idea to take advantage of a rebound to 1.40 dollar.
Meanwhile, the HSBC team revised its forecast on the euro: while it was 1.35 dollar year-end Exchange rate, she sees now the single currency hit $ 1.25 in the first quarter. "To be honest, if there were no such problems related to sovereign risk in the euro area, we might talk about a risk of abyssal fall of the greenback in 2011," said David Bloom.
Since the beginning of the year, the euro fell by 3.2 against the pound sterling and 1.2 per cent against the yen.
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