Barroso Claims Euro is on the Upswing

By Roger Baettig | January 08 2013 9:03 AM

The euro gained momentum on Tuesday morning after beginning to rise on Monday afternoon. On Monday, the common currency was trading at 1.3127.

REUTERS

(L-R) European Central Bank (ECB) President Jean-Claude Trichet , European Commission President Jose Manuel Barroso, Germany's Chancellor Angela Merkel, Greece's Prime Minister George Papandreou, France's President Nicolas Sarkozy and European Council President Herman Van Rompuy leave the EU Council building after a meeting before an informal summit of European Union heads of state and government in Brussels, February 11, 2010.

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Ahead of the European Central Bank meeting, many investors are speculating that the current interest rate will remain unchanged. Although the 17 country bloc is still struggling to find its footing after years of financial crisis, most believe the rates will go unchanged, at least in December. Most investors believe eventually, the rate will be cut again sometime in 2013.

Some analysts believe that the euro's upside is very limited. In an interview with a chief foreign exchange quantitative strategist at Barclays, Wall Street Journal reported that the region's stalled economy would limit gains for the currency in the near term. Barclay's is expecting the euro to trade near $1.32 in the next three months, with a one month price target of $1.30.

Support also came from European Commission President Jose Manuel Barroso, who gave an encouraging talk in his home country of Portugal on Monday. According to the BBC, his talk reassured the markets that unlike 2012, in 2013 investors won't be questioning whether or not the euro will break up.

He warned that 2013 would not be easy, with many countries still struggling to consolidate their budgets and lower their debt. He told the audience that the root of the crisis was irresponsible behavior in the financial sector, and the current reform efforts were just the beginning. However, in his view, the ECB's promise to buy unlimited amounts of debt from eurozone countries was a significant turning point.