NEW YORK (Forex News Now) – Today, forex trading news analyst and economist Warren Mosler, founder of AVM, stated he believed the euro will reach and break the $1.50 mark by the end of 2010, citing increasing deflationary pressure caused by the actions of the European Central Bank.
Mosler, who previously predicted that the euro would approach $1.60 in July, said that there was nothing in his view that would indicate a reversal of the current upward trend for the euro, save for a policy change or shift announced by the European Central Bank. Mosler believes that the euro will continue to appreciate versus the dollar as the latter currency continues to struggle across the board.
Some analysts would characterize the ECB’s actions – primarily buying massive volumes of government bonds from countries like Greece, Portgual, Spain, and Ireland – as inflationary, but Mosler disagrees.
“They’re causing a shortage of euros by requiring governments to rein in spending. It’s a highly deflationary move and that’s what’s driving the euro higher.”
The accompanying austerity measures enacted by several euro zone members has also caused speculation that the euro will rise higher – although some, like billionaire George Soros, take issue with how some of the policies have been enacted. Earlier, Soros launched an accusation against Germany that said the state was promoting austerity measures and pulling the euro zone deeper into deflation.
Other forex trading news that has contributed to Mosler’s belief that the euro will continue to improve includes China’s announcement that it will purchase Greek debt. Euro-centric investors have cheered this move as a sign that the euro is fundamentally sound and not fatally crippled by an inability of Greece to pay down its considerable debt.
Mosler commented on China’s decision, saying that “China would love nothing more than to buy euros. They’re doing it through buying Greek debt. That’s just one more force for a stronger euro.”
Recent forex trading news so far has supported Mosler’s extrapolation. The euro has grown consistently against the falling dollar since EUR/USD’s low point this June, and recently moved past the $1.39 mark before stalling briefly.
The upcoming quantitative easing measures to be adopted by the Federal Reserve before year’s end will also lend upward support to the euro, making the move towards $1.50 – just 1.1 points away – a growing possibility. A World Bank and International Monetary Fund meeting this weekend will shed more light on the potential for the global economy – and, indirectly, the euro – to recover and expand.