Euro Rises on Hopes of Resolution in Greece

The euro has been shedding value for some time, pushed down by the Greek crisis. As the resolution of the crisis nears its end, or at least the time being, the euro is starting to recover lost ground. At the moment, the euro is trading at around 1.4325 against the U.S. dollar, a rise of 0.15%. Analysts are hoping at least one chapter of the Greek debt crisis might be over soon, as the Greek government is preparing for a vote of confidence later today. This will be the first step in getting through the €28 billion spending cuts, which are needed in order for Greece to receive the next tranche of the EU/IMF loan. The euro started gathering strength on Monday, when Klaus Regling, chief of the European Financial Stability Facility, said the Eurozone's bailout fund will be increased from €440 billion to €780 billion. The move can be interpreted as a confirmation that the Eurozone members will defend the euro project until the last cent. The euro was shaken by news from Germany, where data pointed to a deterioration in the country's economic confidence. According to the ZEW Center for Economic Research, Germany's economic sentiment fell to -9.0 in June from 3.1 in May. Most analysts had predicted the figure to be -3.0. At the same time, the Eurozone economic sentiment plunged to -5.9 in June from 13.6 in May. Again, most analysts had predicted a milder fall to 6.1. Readings below 0.0 point to mounting pessimism while above 0.0 value indicate optimism. Recent data will be seen as another evidence that the Eurozone economic recovery is losing pace, putting additional pressure on the ECB not to raise its interest rates. It seems it is time for the U.S. dollar to suffer from debt fears, however, as the House Republicans seem reluctant to raise the U.S. debt ceiling. The consequences for the U.S. economy, however, might be severe. The U.S. government is expected to run out of money by August 2 and Fitch has warned that if the House lawmakers do not raise the debt ceiling by then, it is prepared to put the U.S. debt rating on review. Virtually the same message was given by Moody's earlier this month. Traders who believe the Eurozone debt fears will be replaced by the U.S. debt fears, i.e. that the Greek government will be able to push trough another round of austerity cuts, while the U.S. government will be less successful in persuading the House Republicans to raise the U.S. debt ceiling, will be interested in longing the euro. These traders will, therefore, keep an eye on the ProShares Ultra Euro ETF ULE and the WisdomTree Dreyfus Euro Fund EU. Other traders will be suspicious of the ability of the Europeans to resolve the debt crisis in the Eurozone periphery. Even if the Greek government manages to push through the needed austerity cuts, this might just postpone the Greek default. Traders who believe in the scenario which includes Greece defaulting will be interested in the Market Vectors Double Short Euro ETN DRR.