Euro Falls in Forex Trading on Greek Disappointments

The euro continues to struggle in forex trading on the currency market as the problems in Greece continue weighing on the euro zone. European Union leaders remain divided on the best way to approach the Greek problem, with some -- especially Germany -- reluctant to bail Greece out.

However, Greece has been arguing that it has adopted austerity measures, and tried to work through the mess. However, the bonds it is selling on the market to roll over debt have prohibitively high interest rates, and that is adding further to the burden. Some are saying that the IMF could be a solution, but that could actually threaten the euro zone's monetary sovereignty, proving in some minds that such a Union was foolhardy to begin with.

Another issue is that turning to the IMF, with the European Union unable to solve its own problems, could lead to a chain reaction of southern European countries (including Portugal, which is also on the brink), effectively ending the monetary union. GFT's Boris Schlossberg reports on the problem in FX360:

The Greek issue continues to hover over the EUR/USD  like a dark cloud. If the EU is unable to find a pan-European solution to resolve the crisis, the currency could weaken further on fears that many of the other Southern European economies may be next as risk of fragmentation increases exponentially.

The U.S. dollar, on the other hand, is doing reasonably well, thanks to indications that things are improving as the job market stabilizes.

U.S. Dollar Climbs in Forex Trading on Uncertainty

The U.S. dollar is moving higher in forex trading as uncertainty takes hold of the markets. This isn't surprising, considering the upheaval going on right now. There is a laundry list of reasons that the greenback is making gains in currency trading today, including:

Passage of healthcare reform in the U.S. is making investors jittery.
A pan-European Greek financial solution is taking a blow as Nicolas Sarkozy loses in regional elections in France.
China is considering withdrawing economic stimulus.
India offered a surprise rate hike over the weekend.
It's getting messy out there, and investors are once again looking for capital preservation in the safety of the U.S. dollar.

U.S. Dollar Surges in Currency Trading

The U.S. dollar is surging in currency trading on the FX market as the debt situation in Europe deteriorates. There may be some furor over health care reform in the U.S., but the Congressional Budget Office says that it should reduce the deficit in the long run, and the costs associated with the bill should be spread out so that the deficit isn't over-strained this year.

In Europe, though, the story is different -- and that's why the U.S. dollar has the upper hand in currency trading right now. Forex markets may be a bit rattled by the latest U.S. data, and traders may be in flight to safety mode, but the weakness of the euro zone is one of the dollar's biggest strengths right now.

In Greece, a pan-European solution looks further and further away, and the IMF probably can't bring the cost of Greece's debt down far enough to become affordable. On top of that, Portugal just received its own credit downgrade, meaning that the euro zone has another sovereign debt crisis to contend with. And, while the U.K. isn't part of the euro zone, its debt issues are still causing an effect (and keeping the sterling weak against the dollar).

It is little surprise that the U.S. dollar is gaining against the euro and the sterling on the forex market.