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The euro advanced against the US dollar this morning, as fears over Greece's fiscal problems receded after the European Commission backed a Greek plan that aims to slash the country’s budget deficit to below 3% of GDP by 2012.
An improvement in risk appetite for equities also boded well for the euro. However, the euro's ascent against the dollar may only be temporary. Concerns over the state of other small eurozone countries may also limit the euro’s upside. 'We expect the problems in the eurozone will continue; other countries as well as Greece will have to make tough decisions and growth will be limited,' said Johan Javeus of SEB. In addition, caution ahead of tomorrow's ECB interest rate decision and Friday’s US non-farm payroll figures may weigh on the euro. On Thursday the ECB is expected to keep interest rates unchanged at 1%, while Friday's US non-farm payroll data are expected to show the US economy adding 10,000 jobs in January.
