As worldwide fears of an economic slowdown mount, the United States dollar is starting to look like it is the best choice for would be traders looking to preserve capital. The dollar had a strong showing on many fronts on Monday, April 02, 2012, including against the Euro. This was partly due to an announcement out of Europe today that manufacturing is slowing down faster than expected. This does very little to alleviate Euro debt worries and in fact, makes the Euro look a bit more unstable. Traders looking to short the Euro and pick up greenbacks saw a gain of about 0.14 percent for the day.
The British pound came under question today as well, as the UK released that it had its slowest manufacturing month since December. While the pound ultimately rose in price in relation to the dollar by about 0.09 percent, there is cause to worry that these two European currencies are going to lose a lot of steam. The dollar is, of course, the most logical alternative to these beleaguered currencies.
As the dollar seems to grow stronger, there are other signs besides worldwide currencies showing that indicate that this is the case. The Dow, the NASDAQ, and the S&P 500 all had stellar days as the economic outlook for the U.S. in 2012 begins to brighten. With the first quarter of the year over and officially productive, these stock market indices all went up in value. While the U.S. markets and the U.S. dollar don’t always move in lockstep, the economic data for the U.S. is starting to improve. Joblessness is down to about 8.3 percent, the lowest it has been in quite a while.
But in Europe, the jobless rate continues to go up. The rate is currently the highest it has been in the last 14 years at about 10.8 percent. This undoubtedly is going to play a big factor in the Euro’s value over the next several months. If European jobs and manufacturing are both down, things do not look good for the long term Euro holder. This is a large part of the reasoning behind the Euro’s recent collapse.
And while the Euro is still in a better spot than it was three months ago, it has been in a relative consolidation motion for the last two months, as the price oscillates up and down without really making up its mind which direction it wants to head. This is due in a large part to the Greek debt crisis, but it is also not resolving itself because of deeper running problems that flow throughout all of Europe. The consolidation will not last forever and when it ends, the Euro will most likely fall to a more appropriate level.