Many probably wonder why EURO rising against the dollar while most other currencies fall?
To get the answer, just look at the profitability of what some peripheral European bonds.
For example, the yield on two-year Spanish.
As we can see, on Monday, the opening was 0.33, and yesterday the yield reached 0.5%.
This reaction is, firstly, the outcome of elections in Greece, but also probably a reaction to the QE program by the European Central Bank.
If we look at the profitability of US Treasuries, we see that on the eve of the launch QE program they kept falling (banks bought bonds), and after the launch of QE, since at some point, have grown.
The fact that the elections in Greece could lead to an increase in EURO, I warned the day before the elections in Greece.
Elections in Greece and EURO
Many believe that a potential Greek exit from the eurozone is a major negative for the EURO.
I think they are wrong. Things are not so simple.
Bond yields many eurozone countries are at record lows. We have here a bubble bigger than in America. In the near future there may come a U-turn, and, as often happens when turning major trends, it will happen very rapidly.
Potential exit of Greece from the euro zone could lead to an explosive growth of profitability on the market of European bonds and make it more attractive EURO-assets. In this situation, renewed capital inflows lead to an increase EURO.
Flight of customers from Greek banks can cause a liquidity crisis in European banks, which in turn will also promote the influx of EURO-currency.
The yield on Spanish bonds have room to grow. In 2012, the yield of 2-hletny securities reached 7%.
The first growth momentum appears to yesterday's daily candle has dried up. But subsequent negative news for the euro area of Greece will lead to a new surge of European bond yields, which will translate into new growth impulses EURO.
So it will be as long as the situation around Greece more or less not clear.
Author: Nicholas Ludanov
Fundamental analysis of the currency market Forex4you