Euro Strengthened By Eurozone Debt Reduction Measures

The euro has pushed higher in the market amid discussions over an increase to the eurozone rescue fund and plans for a tougher round of stress tests for European banks.

The euro gained more than a cent against the US dollar on Tuesday to reach a high of 1.34 whilst the pound, boosted by the prediction of an interest rate rise, reached 1.194 euros.

The European Commission and European Central Bank have called for an increase to the European Financial Stability Facility (EFSF) which can only contribute 250b to any future bail-out without risking its maximum triple A rating.

The EC and ECB fear that this would not be sufficient enough to rescue Spain which is thought to be next in line for a possible EU bailout.

However, Jen-Claude Juncker, chair of the EU ministerial meeting has denied that such an agreement has yet been made. He said only that, “The discussion was broad and will be narrowed in the next couple of weeks.”

Meanwhile, the currency market has also been strengthened by discussions in Brussels of a tough round of stress tests for European banks.

The tests, which serve to strengthen the banks’ financial standing, are widely seen as an important step in resolving the EU crisis.

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