Investors have not yet fully digested the Federal Reserve in the second round of quantitative easing on the occasion of the impact of the dollar, the euro market and show more concern. Yesterday the euro against the dollar has fallen sharply, and once below the 1.39 mark.

Optimistic about the data support the dollar

The euro against the dollar yesterday, fell by more than 100 basis points more than in Europe, below the 1.39 line a short time, while the euro against the dollar last week rose to 1.42 above. Analysts believe that the United States on Friday October non-farm employment data continue to support the dollar. As the U.S. dollar decline over the past two months is too large, the stimulation of good data, investors are buying back the dollar oversold.

U.S. rival as the most important currency, the euro’s decline yesterday, the most obvious, after yesterday’s entry into the European session, the euro’s decline continued, the German side announced less than expected in September industrial output data, which takes short-term euro against the dollar suppressed to below 1.39.

Beijing on Thursday morning the Fed announced the size of 6,000 billion asset purchase plan, then the U.S. dollar against most currencies fell sharply, but Beijing announced on Friday night, the U.S. October non-farm employment growth of 15.1 million, a substantial better than expected growth of 6 million people, but also support the dollar rebounded from early declines. But the market’s views tend to think the dollar will fall because of the quantitative easing policy, once the data better boost to the dollar may be limited.

But the dollar did not immediately return to decline, analysts pointed out that if U.S. data continues to improve, the Fed may not implement all of the asset purchase plan, which it bought back early investors were sold a lot of dollars.

Counter-cyclical policies unfavorable euro

It should be noted that the decline in the euro compared to the performance of other non-US currencies fairly mild, the Australian dollar is still maintained at above 1.01, the pound against the dollar also held steady in the European session on the 1.61, a drop of only a few ten basis points. This allows the market had more concerns about the euro.

In the euro zone countries such as Germany’s main industrial output data such as orders and drop the case have emerged, investors began to recall those highly indebted countries in the euro area, as well as the implementation of fiscal austerity on the euro-zone economic impact of the euro area .

German Ministry of Economic Affairs said yesterday that Germany is still the main driver of economic growth from the industrial sector, but the growth momentum of decline. In addition, investors started to pay attention in Ireland will continue to be lowered rating last week, the Irish 10-year German bond yields and bond spreads over the same period hit a record high of 5.31 percentage points.

Can be seen that the economic situation in the euro area is not so good, and in the United States started the second round of quantitative easing (QE2) in the context of the policy stance of the euro area fundamentals of the euro area may be even more unfavorable.

ECB interest rates unchanged last week, and the European Central Bank also said that it would gradually withdraw the policy response to the crisis, it means that U.S. policy in favor of liberal policies in Europe, tightening bias.

A direct consequence of the above comparison should be stronger euro, the market may even take this as a reason to continue buying the euro; but further consideration, then no doubt the European Central Bank adopted a counter-cyclical initiatives, is not conducive to economic recovery in Europe, but also in European financial great belt-tightening, with the cumulative effect of the show, the U.S. economy should recover first. Therefore, from the long-term prospects, the dollar’s outlook remains better than the euro, the fundamentals of the factors that seem to imply that the euro should now start shorting again.

Australia last week, a surprise rate hike in India, the United Kingdom, the European Union do anything, the United States of quantitative easing, global monetary policy presents “Great Divergence” of the situation. But QE2 met, including China, Brazil and other emerging market countries and the German critics, that the QE2 will they impact the economy.

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