The euro is exhibiting signs of becoming a carry trade currency. Carry trade is when markets borrow in one currency to fund the purchase of assets in another currency. The end result is a general weakening of the funding currency and rise in prices in some asset classes.
Carry trade is when markets borrow in one currency to fund the purchase of assets in another currency. Reuters
In the last one month the euro has fallen by over 5 percent against the US Dollar. Euro has come off from $1.34 to $1.27 since the beginning of December 2011 to date. Equity indices in the same period have been positive to mildly negative across geographies. US and European indices have gained over the last one month even as the euro fell to one year lows. A one month trend may not be a precursor to the future, but looking at the fundamentals of the euro, the trend may well continue. The trend of a weakening euro and rising equity prices is a good possibility for the rest of 2012.