The Euro broke a resistance level this morning against the US dollar. The EUR/USD pair broke well above the 1.30 level, beyond the 1.308 level and keeps going up. The European currency has also made neat gains against other currencies.
This gain was fueled by yesterday’s Federal Reserve Budget information: The deficit rose to 164 billion dollars. Also the figure was slightly better than expected, it’s very high.
Adding fuel to the fire, the Congress approved a bailout package of 14 billion dollars to the auto industry. Now, where will the money come from?
Another weakness for the US dollar are the high expectations for another interest cut, getting it one step closer to nothing. Bernanke’s decision is due next week.
Some analysts claim that the pain that the dollar is receiving is also due to the recent rallies in stock markets. The renewed appetite for stocks makes the American currency unpopular.
Merrill Lynch’s forex strategist, Daniel Tenengauzer, says that eventually all the world will return to the dollar. The big change in the behavior of American consumers will make them save much more money in their bank accounts – something that will back-wind the USD.