Sovereign debt crisis troubles in Spain and Italy, two of the euro zone's larger economic systems, will pull down the common currency of the European Union, forecasters with strong records for accurate projection records told Bloomberg.
Currency strategy head Nick Bennenbroek with Wells Fargo told the news service early this month that the euro will drop 5 percent by the end of this year, rendering the monetary unit's strong first quarter of 2011 for naught. He said gains for the euro are set to run dry and actions by the European Central Bank will weigh heavily.
"Europe's going through deleveraging, austerity, and growth is very poor," senior currency strategist Richard Franulovich with Westpac in New York told the news service earlier this month. "So you have a situation where the ECB could be easing and the Fed is basically on hold, and that should mean interest-rate differentials move in the dollar's favor."
The Wall Street Journal reports Spanish and Italian struggles drew down the monetary unit's performance on Tuesday.
Worries about Spain's ability to close the budget gap were augmented by Spanish bond yields on 10-year notes reaching their highest rate since late last year.