The Euro firmed against the US Dollar on Monday as concerns over a possible banking crisis in Portugal waned to reduce demand for the safe haven ‘Greenback’.
Portugal’s largest bank, Banco Espirito Santo spooked the markets last week after its parent company failed to make a number of payments.
Credit rating agencies Moody’s and Standard & Poor’s downgraded the banks rating on Friday. As the news broke the Euro fell sharply against the safe haven currencies of the US Dollar, Japanese Yen and Swiss Franc.
On Monday the Euro recovered some ground after Portuguese Prime Minister Pedro Passos Coelho calmed market worries by saying that Portuguese taxpayers will not be called upon to save the bank.
“Private businesses have to suffer the consequences of the bad deals they make. Taxpayers will not be asked to bear the losses of private companies,” Coelho said on Sunday.
Quick action by the Bank of Portugal also settled the markets nerves as it sped up the process of bringing the bank under new management. The bank saw a respected economist installed as chief executive.
The relief over the Espirito Santo bank situation caused investors to widely overlook Monday’s disappointing Eurozone industrial production data.
According to Eurostat, output from the 18-member Eurozone’s mines, utilities and factories fell by 1.1% in May, further highlighting the weakness prevalent in the single currency region’s economy.
The decline in output was seen in various Eurozone economies with only the Netherlands seeing an increase in production.
The US Dollar is unlikely to see movement until Tuesday when Federal Reserve Chairman Janet Yellen gives testimony to Congress.
Investors will be looking for indications as to the future direction of the central bank’s monetary policy after last week’s policy meeting minutes for June offered little in the way of information. The latest US retail and chain store sales data is also due for release.
For the Euro the newest ZEW Economic sentiment Index data for Germany and the wider region will be released. Both reports are expected to show a decline in sentiment for this month.
Euro Exchange Rate News:
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