Euro Forex Trading Forecast

Currency trading with the euro

The euro forex trading forecast does not look good. The European Union is not planning on a massive bailout of Eastern and Central European banks. On the news, the euro dropped against the US dollar in currency trading. This scenario, which is adding to risk aversion, comes as the US government announces its increased stake in AIG.

Both of these events are likely to send the euro lower in forex trading. But the failure to bailout Eastern European and Central European banks could actually do even more damage in the eurozone. GFT’s Boris Schlossberg reports in FX360 on the interconnectedness of non-eurozone banks on the eurozone economy:

The disarray in the European Union only served to stoke fears that the ultimate euro bear scenario of a fractured and fragmented Eurozone could soon become a reality. The great danger of ignoring the problem centers on the fact that Western European banks stand to lose the most, should Central European economies go into tailspin. With nearly 0 worth of consumer and corporate debt due to be rolled over this year, EZ financial sector could face massive write downs if consumers and corporate in Eastern Europe default on their mortgages and lines of credit most of which are denominated in Euros or Swiss francs.