Home Analysis Main reasons for the euro jump

Main reasons for the euro jump

by Dragan Stankovic

euroIn the last few days the euro fights back in comparison with almost every important currency. In the last couple of days the European currency jumped 3 percent against the British pound, 3.5 percent against the U.S dollar and 2 percent in comparison to the Swiss franc.

There are two main reasons for this. The first one was the meeting of the headmen of the European Central Bank held this Thursday, after which their president Mario Dragi, told the press that they are pleased with the injection they give to the euro zone in the last couple of months. This injection of 60 billion euros and the statement of Dragi was a sign for the investors on the foreign markets that there won’t be a necessity for this program to be continued after it’s deadline in September 2016, so they rapidly started to buy euros. This trend got its price up overnight.

The shutdown of selling accounts for euros which were massively opened in the last year by speculants is the second reason for the increased strength of the euro. Data from the American market for futures arrangement show that about 83 percent of the big speculants for the euro still have opened selling positions, which shows that they are expecting further weakening of the common currency. As a matter of fact, almost all contestants of the market have already sold euros, so there is shortage of demands, that could cause the euro to fall. In a situation like this, even the smallest euro demand can cause an eruption of shutdowns of selling accounts and new strength for the euro. That situation is called short squeeze and it’s not uncommon in the financial world.choose forex - short squeeze

Considering that the majority of experts expect another euro drop, Admiral Markets analysts believe that the short squeeze could continue for a couple of more weeks. The euro could even become stronger in that period of time against the U.S dollar and the other major currencies, but that would be only temporarily.

The situation with the economy in Switzerland, USA, Britain and Scotland is still on a higher level than in the rest of the euro zone, which on the long run can cause strengthening their currencies against the euro. Another factor is the one that after six years of extremely low rates in the United States, we are on the verge of tightening of the monetary politics. This will cause another wave of dollar strength pumped in, and even better situation for the American currency against the euro.

forex traders - ukraine gas russiaAt the end, we must not forget some of the other reasons for euro’s unsafe faith. The crisis between Greece and the euro zone about their debt, the situation in Ukraine and the bad relations with Russia can all be a potential reason for some capital to be moved from euro into some much more safer currency, and by that to cause another euro fall..

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