WITH the EU rescue package for Greece in place, some of the more immediate concerns that plagued the euro have been addressed, but the currency markets are still sceptical as to whether the Greek bail-out solution will be enough to quell sovereign debt worries. Until and unless the spreads on other Club Med countries such as Spain, Portugal or Italy begin to tighten, the downward pressure could resume once the short covering is done.

Ironically enough, the current turmoil in the 16-member Eurozone which has resulted in a 10 per cent decline for the euro since the start of the year, may be providing a much needed stimulus for the export-centric region. Last Friday’s German trade balance saw a surge in exports, which increased 9.6 per cent from the same period a year ago.

Germany’s export sector is one of the few bright stories in the Eurozone and remains the key driver of growth for the region as a whole. It is benefiting not only from rising demand as the global economy continues to recover but also from the lower exchange rate for the euro, which is providing a much needed competitive advantage to the country’s producers.

As the Greek story finally recedes from the headlines, dollar bulls will try to prove that the recent rally in the buck is not merely a function of its status as the anti-euro, but rather the result of a genuine improvement in the US economy. The key economic event on the calendar this week will be today’s US retail sales.

The report, set for release at 1.30pm UK time, is expected to show a rise of 1 per cent from 0.3 per cent the month before. Given the very strong sales performance from US retail chains, which saw their March numbers rise 9 per cent on a year-on-year basis, the chances are good that the overall US retail figures for March could surprise to the upside.

If the US consumer is back in business, the US economy could see much better growth in the second half of 2010 and the dollar’s rally could continue irrespective of what happens in the Eurozone.

Boris Schlossberg and Kathy Lien are directors of currency research at GFT. Read commentary at or e-mail