By TraderVox.com
When euro-area was in deep crisis, numerous economists predicted the end of the economic block. The Greece debt crisis looked insurmountable and this crisis was compounded by troubles in Italy, Spain, and Ireland, which looked to follow the way of Greece.
Analysts indicated that the best thing for Europe and Greece was for Greece to leave the union. But this was not what was in Draghi’s mind; after Greece successfully secured the bailout money needed to avoid default, Draghi gave the euro region financial institutions additional three-year loans that have boosted the economy in the region. The success of these loans has silenced many analysts who predicted fallout in the region.
One of the economists who admitted having irrational market panic at the end of 2011 is Holger Schnieding. He also recommended the ECB’s efforts that have brought some semblance of calm diminishing the breakup sentiments. According to John Normand, the currency might even trade at $1.34 by June this year. The continued focus on relieving credit crunch by the ECB officials has yielded fruits with euro gaining stability over the last three months. Investors are still keeping a close eye on events from Greece as some analysts still warn that the crisis is far from over.
Despite the success cited by Draghi on his March 8 statement, some analysts still believe that the euro might go down since the Greek debt crisis has shown that investors can lose money investing in bonds. Ian Stannard, a European Foreign Exchange Strategists pointed that Spanish bonds are looking awful and this might lead to another loss to investors. He also indicated that the need for further action by the ECB might have reduced hence making the currency prone to weakening.
The euro region economy is expected to decline by 0.4 percent in 2012, with recessions expected in countries such as Greece and Italy. Germany is expected to grow by 0.6 percent in the same year. On the other hand, the US economy is expected to grow by 2.2 percent hence making it the stronger economy. This may prompt investors to buy dollar assets as they seek safe haven currencies.
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