USD/EUR Outlook, 2012

The Euro finally rose against the US Dollar shortly after reaching a 16-month low against the Dollar.

The markets today eagerly anticipate the meeting between the German Chancellor Angela Merkel and the French President Nicolas Sarkozy during which they will work on the “fiscal compact”. The meeting is to prepare the EU summit scheduled for January 30th which shall reveal ways to boost the EU economic growth. Before the meeting even takes place, the Euro demonstrated gains against the Dollar as it climbed up to $1.2761. Yet, however, further declines are expected as investors are still concerned over the debt crisis.

Despite today’s growth of the Euro, the US Dollar has been gaining lead against the single currency especially since last week the US jobs data was unexpectedly high. The US jobs data also emphasized the growing difference between the United States and Europe which inevitably means weaker EUR/USD pair. Experts say the United States is on its way out of the economic crisis, supporting the statement that “Outside Europe the world looks better – but not great.”

At the same time, the outlook for Europe in 2012 is hardly defined as bright or hopeless, although the biggest fear is from Euro collapse and thus – full blown recession in the euro zone.

EUR/USD  $1.2751

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