Euro Makes Gains On Bailout Fund Optimism

Online, September 11, 2012 (Newswire.com) - The euro made significant gains Tuesday on expectations that a German Court will back the euro zone bailout fund. Germany's Federal Constitutional Court will rule Wednesday on whether the euro zone's permanent bailout fund is in keeping with the German Constitution. Most analysts don't expect the court to block the European Stability Mechanism (ESM), however it is likely that more limits and conditions could be called for. A final decision by the court on the rescue fund is expected in December, but the hearing scheduled for Wednesday should give a good indication of whether the ESM will be operational in October.

The possibility that the German court could reject the ESM seemed to cap gains Tuesday, but Corolla Financial analysts believe that further gains should be seen upon the acceptance of the ESM at Wednesdays hearing and throughout the coming week.

In trading on Tuesday, the euro hit $1.2837, which marked a four month high against the dollar. Finishing the day up 0.5 percent and marking a 6+ percent rally from its July low of $1.2042.

The positive euro movement could indicate some future stability and with expectations that Wednesday's hearing in Germany should be positive, the coming month could be very good to the euro. Though sentiment is generally positive regarding the euro, the currency is still very vulnerable. Corolla Financial analysts believe that the currency will continue to rally and could easily stabilise around the $1.30 mark, however developments in Spain, Italy and Greece could cause rapid devaluation down the road.