Commodity Trader's Almanac 2O11

16

EURO PEAKS AGAINST U.S. DOLLAR

The euro currency was first introduced to the world markets in 1999 and was finally

launched with bank notes and physical coins in 2002. As of June 2010, the following

countries use the euro as their official currency: Andorra, Austria, Belgium, Cyprus,

Finland, France, Germany, Greece, Ireland, Italy, Kosovo, Luxembourg, Malta, Monaco,

Montenegro, Netherlands, Portugal, San Marino, Slovenia, Slovakia, Spain, and Vatican

City. Estonia is expected to begin using the Euro on January 1, 2011.

The European Central Bank dictates mone-

tary policy and puts more emphasis on inflation

concerns rather than on economic contraction.

We have seen in the past where the ECB would

rather maintain steady interest rates than stoke

the flames of inflationary pressures. As a result,

the ECB is less likely to adjust interest rates.

How ever, in early 2010, a European sovereign

debt crisis emerged and spread throughout Spain,

Portugal, Greece, and then Hungary. Even though

Hungary has its own currency, the forint, European

banks were exposed to potentially bad loans in

that country, which eroded confidence even fur-

ther. This left the ECB with more than just an interest rate adjustment agenda.

Despite this wall of worry, seasonally speaking, we do see in the 12-year history of the

euro a tendency for prices to head lower against the U.S. dollar on or about the third

trading day in Januar ...