Euro rises to seven week high on Thursday

A report suggesting that Spain is talking to Eurozone leaders about the conditions of a possible bailout saw the euro rise yesterday for the fourth day in a row to hit a seven-week high of $1.2589.

Some analysts believe that Spain wants to bring down its borrowing costs by allowing the European rescue fund to buy government bonds at primary auctions, paving the way for the European Central Bank to then make a move in the secondary market to lower yields.

Positive business surveys from both Germany and France also suggested that the Eurozone is in better shape than first thought, while minutes from the latest meeting of the Federal Reserve on Wednesday suggested that more quantitative easing could be introduced in the US, helping to bring the dollar down.

There is likely to be a lot of movement in the foreign exchange markets in the next few weeks ahead of key September meetings of both the Fed and the European Central Bank. French president Francois Hollande and German chancellor Angela Merkel also met this week to discuss Greece’s request for an extension. The power pair, however, put on a united front, and told Greek PM Antonis Samaras to stick to reform targets if he wants any kind of leeway on the bailout agreement.

Samaras was in Berlin this week in an attempt to convince Eurozone leaders that his country needs more time to implement the harsh austerity measures that have been called from by the troika. No firm decision is likely to be made, however, until the three lenders deliver their report on Greece’s progress next month.