Euro Finds Support on Assumption that Sovereign Debt Crisis will be Contained

The euro is finding support on the assumption that the sovereign debt crisis will be contained. Many forex traders seem to think that European leaders are serious about finding a solution to the debt crisis, and that it will be contained.

Even though there doesn’t appear to be plans to expand the EFSF, there is an expectation that European leaders will do something to prevent the spread of sovereign debt contagion before it can bring down Italy, Spain, and possibly France. Right now, efforts to require recapitalization for banks appears to be in the works, as well as a focus on protecting the ECB from problems stemming from the amount of Greek debt it is exposed to.

Right now, these considerations don’t seem to be causing a lot of disquiet, though. At 13:51 GMT, EUR/USD is higher at 1.3615, a change of 0.0083 above the open of 1.3533. EUR/JPY is also higher, 104.05 rather than 103.33. EUR/GBP is virtually unchanged from the open at 0.8693.