viernes, 5 de octubre de 2012

Wondering what a dollar will cost?

News coming out of Europe has had the peso on a roller coaster. If the ups and downs of the efforts to resolve the European crisis continue to impact the exchange rate, there are several events coming up in Europe this month that could derail the peso's appreciation.

The Euro Group meeting on October 8-9 will be followed by the EU Summit on October 18-19. Bad news coming out of either of these meetings could hurt the peso. Spanish regional elections will be held in Galicia and the Basque country on the 21st. Will they endorse or repudiate Prime Minister Rajoy's economic strategy? Will Spain be forced into a conditionality program to activate the ECB's bond purchase program (OMT) to hold down its borrowing costs?

The underlying economic fundamentals will determine the cost of a dollar over the long-term. In the short-term, what's happening in Europe will too.

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