Euro Struggles in Forex Trading

The euro is struggling in forex trading right now, thanks to a number of developments in the European debt drama. Between Greece, and now Portugal, the euro zone has its work cut out for it.

The initial selloff for the euro on the currency market came in response to Greece, reports Boris Schlossberg in FX360:

The selloff was precipitated by fears that an IMF involvement in the Greek (Germany's preferred solution) budget crisis may not be enough to help Greece reduce its financing costs which are double that of Germany’s. Without a pan-European loan guarantee Greece may not be able to lower it cost of borrowing which is the primary concern of Greek fiscal authorities. Markets will keep a watchful eye on the EU summit tomorrow for any clarity on the issue.

Of course, this news was soon followed by the credit downgrade for Portugal, sending further shock waves through the euro zone -- even though most probably saw it coming. Also weighing are concerns about British debt. Even though Great Britain isn't part of the monetary union, its economic stability (or perceived stability) influences the euro zone.

Right now, the U.S. dollar is gaining against both the sterling and the euro in forex trading. With political leaders in the U.S. promising that health care reform with reduce the deficit in the long run, and the situation so dire in the euro zone, it is little surprise that the U.S. dollar is the currency of choice right now.