Euro Gains For Fourth Straight Session

The euro rose against the dollar for the fourth straight session causing a significant change in the euro to dollar exchange rate. Improved German investor sentiment prompted many to believe that the worst of the recession in Europe is over. A stock rally improved investor sentiment and also affected the euro to dollar rate. Worries about the health of the US auto industry also put pressure on the dollar.

UK Economy Contracts

The dollar is widely seen as a safe haven by forex investors when economic news is bad and increased risk appetite traditionally puts pressure on the US dollar. On Friday the euro to dollar rate rose 0.7% to $1.3245 after rising as high as $1.33. The euro to pound rate stands at 91 pence, a two week high. Data showing that the UK’s economy posted its largest contraction in 30 years put pressure on the Pound. On Friday the pound to dollar exchange rate was at $1.4661, a decline of 0.4%.

Economic Decline Slowing

The euro to dollar rate declined slightly after the US Federal Reserve announced that US banks must hold substantial amounts of capital beyond those required by regulation. Some economists believe that stocks could decline in the days ahead if any banking troubles surface. Finance leaders from the G7 group of nations stated that economic decline was slowing helping to bolster the euro to dollar rate.

Busy Week Ahead

In coming weeks the euro to dollar rate is expected to be affected by the slew of economic data coming from Europe and the US. Earlier in the week the ZEW report from Germany had a positive effect on the euro to dollar exchange rate. While many see the worst of the recession declining, this week’s performance by stock markets could be an indicator of things to come in forex markets.