EUR/USD: Euro Zone Optimism Props Up the Euro

With a strong run in risk-appetite fueled by the Federal Reserve's indication of a third round of monetary easing, the US dollar lost heavily against the Euro in the previous European trading session. The Eurogroup meeting in Cyprus last week also supported the single currency as speculations grew that Spain would already be asking for financial assistance and that Greece would be granted more time to meet its targets. Given these factors, the demand for riskier assets is likely to rise, giving way for the EUR/USD pair to incline in today's European trading exchanges.

Last week's meeting of the Eurogroup officials heightened speculations that Spain is getting closer to asking for a bailout request as reports revealed that Eurogroup Head Jean-Claude Juncker and European Commissioner for Economic and Monetary Affairs Olli Rehn said that Spain is already getting ready to present a new economic reform. Also, Greece could be granted more time to comply with its targets after Juncker said that they could exclude the idea of Greece leaving the Euro Zone, and International Monetary Fund Director Christine Lagarde said that they could examine more time for Greece as it has taken a huge effort in steering the economy to recovery, although she stressed that the indebted country must carry on with the economic reforms.

Meanwhile, the Greenback continues to suffer from the Fed's decision, plus optimism about the Euro Zone debt crisis. The Fed said that it would buy 40 Billion Dollars worth of mortgage-backed securities per month until the labor market condition improves, seen to keep the Dollar under pressure. With all these factors, a buy bias for the EUR/USD pair is recommended in today’s European exchanges.

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