Euro Weakens as Questions Persist

Euro is weakening today against the US dollar and the UK pound as questions about the economic viability of the eurozone persist. Even though it’s clear that eurozone countries can still sell bonds, investors are asking for higher yields. The continued economic struggle in the eurozone is weighing on the euro.

Economic forecasts for the eurozone have the region slowing this year, and some think that a recession could already be underway. With so many countries enforcing austerity measures, there isn’t the spending to spur economic growth. Bond auctions are seeing success, but yields are rising. Spanish bond yields are higher, and even French bond yields are higher on the expectation that sometime later this year or early next year France’s rating will be downgraded.

As a result, the euro is dropping on the Forex market. Euro is down against the US dollar as risk aversion and a better situation in the United States both weigh on the 17-nation currency. Euro is also down against the UK pound. The Bank of England has indicated that need for stimulus might be past, and that is boosting the British currency. Euro has even pared its recent gains against the Japanese yen.

At 13:26 GMT EUR/USD is down to 1.3105 from the open at 1.3123. EUR/GBP is lower at 0.8170, down from the open at 0.8191. EUR/JPY is higher at 106.8045, up from the open at 106.6300, but off the session high of 107.3750.