The euro has opened above USD1.08 against the dollar this morning, recovering modestly ahead of tomorrow's speech by Colin Powell to the United Nations. The euro declined last week after seven European nations came out in support of action against Iraq, ending - temporarily - the US' political isolation that had been weighing on the dollar.
However, the euro's gains have been capped by domestic concerns. "Worries over the weakness of the eurozone economy could pose a threat to the euro's rally," said Geraldine Concagh, senior economist at AIB Treasury, noting a Wall Street Journal report that German banking giants Commerzbank, HVB and Dresdner will likely post their first annual losses since World War II.
But tomorrow could see the euro renew its upward moves, as geopolitical concerns return to the fore. According to Ulster Bank's Niall Dunne, if the evidence presented by Powell to the UN tomorrow is insufficient to merit another resolution, yet the US deem it sufficient to commence unilateral action, "then the US again will become isolated in the international community and the dollar will fall". //www.fxcentre.com