How is the forex market? The euro fell to its lowest level against the U.S. dollar in 2013 on Friday amid concerns over political stalemate in Italy and some weak euro zone economic data. Meanwhile, continued signs of improvement in the U.S. economy pushed the dollar index to its highest level in six months. Market participants are expecting borrowing costs for peripheral euro zone countries to rise following some weak economic data and political uncertainty in Italy. Traders believe that if borrowing costs rise, the European Central Bank (ECB) will be forced to slash euro zone’s benchmark interest rates, which would put pressure on the euro. Speaking to Reuters, Howard Jones, Advisor at RMG Wealth Management, said that when you look across Europe, you see high unemployment, barely any growth, apart from Germany, and rising debt levels. Jones said that what Europe needs is growth and easier monetary conditions. He added that the U.S. data in comparison is much matter than Europe and therefore the dollar is a buy. Jones expects euro to ease towards the mid-$1.20s in the next two months. While the prospects for the euro zone look gloomy, in U.S. economic data continues to point towards a recovery. On Thursday, a report showed that manufacturing activity in the Chicago area rose in February. A report from the Labor Department showed that initial jobless claims fell more than forecast last week. The strong economic data has pushed the dollar higher against major currencies. The greenback is gaining even as a last-minute deal to avert automatic spending cuts or sequester looks unlikely. At last check, the euro was trading 0.5% lower at $1.29855, the single currency’s lowest level against the greenback since December 11. The dollar index, which tracks the performance of the greenback against six major rivals, climbed 0.3% to 82.228, the highest level since late August.

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