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U.S. Financial Market in Turmoil over Euro
[Source:
nahbenews.com
, June 25, 2010]
Turmoil in the Euro currency union stemming from fiscal problems in Greece and Spain and some other member countries has spilled over to the U.S. financial markets.
For now, the United States is benefiting from foreign investors seeking safety in Treasury securities and other U.S. fixed-income assets, pushing long-term interest rates lower. Below the 5% threshold for seven consecutive weeks, 30-year, fixed-rate mortgage rates are now among the lowest on record.
Although lower long-term interest rates are a positive for housing and the economy, the rising value of the U.S. dollar against the euro will increase the prices of U.S. exports and dampen demand for them in Europe.
Demand in Europe is likely to weaken further as governments on the continent impose stricter fiscal measures out of concern over their sovereign debt. On balance, lower interest rates but fewer exports will likely impose a minor drag on U.S. economic growth.
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