Euro Continues Its 4-Day Rally on New Prospects for Stability

The euro is rising for the fourth day in a row on the Forex market today, following the successful pass of the anti-crisis vote in Greece, “stability bonds” talks in eurozone and a possible revival of the corporate bond market in Europe.

Lately, the single European currency is a major headliner of the Forex market news, as the European debt problems are a major headliner of the financial news nowadays. The euro is currently demonstrating its fourth day of growth in a row against the US dollar and the first one after 3 days of losses against the British pound.

The currency benefits from the yesterday’s victory of Greek Prime Minister George Papandreou‘s party in the vote for the property tax, which will help reducing public debt in the country, decreasing the chance of the credit default. Additionally, the markets are filled with the optimism, as European Commission President José Manuel Barroso talked today about introducing “stability bonds” in the eurozone — a kind of joint EZ bonds with shared responsibility. Such bonds may become available to the investors only when the union will reach a certain level of ”integration and discipline”.

The stock market has also played its role in the euro’s growth today as it recovered from the early morning fall. Stock market optimism is supported with the news of increase of the collateral bonds usage in the European corporate sector, which may give a second breath to that bond market.

EUR/USD rose from 1.3586 to 1.3613 as of 9:42 GMT today. EUR/GBP increased from 0.8692 to 0.8713 today, while EUR/CHF (although it isn’t a part of the ”free” Forex market) is demonstrating a rise from 1.2178 to 1.2203.

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.