Euro and Pound rise as Eurozone fears eased

Both the Euro and British Pound had a positive close to the week on Friday after fears were eased over the Eurozone debt crisis.

Strong economic data from Germany and a weakening US dollar boosted the euro last week resulting in its best performance since 23 November when it climbed 1.6 percent to $1.3586 against the US dollar.

The sterling also gained as stronger than expected UK consumer price inflation data indicated likely rises in interest rates. Against the US dollar the pound rose 0.8 percent to a two month high of $1.5990.

Despite reports over recent weeks of a possible bail-out for Portugal and debt restructuring in Greece, investors seem to have to regained confidence that the debt crisis can be contained.

“The euro continues to find support, which appears to reflect the view that ultimately the eurozone will survive its crisis,” Jane Foley, analyst at Rabobank told The Financial Times.

“We are of the view that the euro will move higher against the dollar. The combination of loose fiscal policy and monetary policy in the US could push the euro towards $1.50.”

In addition to a weakened US dollar, it is believed that the euro is also being strengthened by increased buying by Asian central banks wishing to diversify their previously US dollar-based currency reserves.

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