Greece’s Budget Deficit Affects Euro Performance

The euro declined today versus most of the 16 main trade currencies as some of its member countries, specially Greece, are having a hard time to adjust its national accounts, decreasing confidence among investors to inject capital in the region.

Greece’s deteriorating financial situation once again influenced negatively the euro’s outlook as German Chancellor Angela Merkel affirmed that the Southern European budget deficit may hurt the sentiment among investors regarding the common currency, which had been already impacted by Greece’s credit rating when it was downgraded for the second time in a year in late 2009 by Standard and Poor’s. European Central Bank Jean-Claude Trichet also affirmed that the euro’s future remain uncertain, decreasing even further the appeal for the currency, which lost versus the greenback despite weak economic data published today in the United States.

According to analysts, not only Greece, but countries like Portugal, Spain and Italy may threaten the euro’s performance as they also face complicated financial scenarios, with budget deficit’s much beyond the Eurozone members maximum accepted level, which in theory has a limit of 3 percent of gross domestic product.

EUR/USD declined to 1.4478 as of 15:45 GMT from a previous rate of 1.4515 in the intraday comparison. EUR/GBP fell to 0.8878 from 0.8907.

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