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What's Really Driving the Euro

Look through the headline tumult, and the euro is still trading on traditional factors.

It's been a busy week in the euro zone, what with the European Union summit, the waiting and watching for a Spanish bailout, and the anti-austerity demonstrations in Greece.

None of this is fazing Michael Woolfolk, senior currency strategist at Bank of New York Mellon .

Regarding the summit, he says, "what we're getting from EU officials is more of the same, but nonetheless it's what the market wants to hear right now."

As for Greece and its desperate need for international aid, "a decision has already been made," Woolfolk says. "The decision from the troika will be announced in early November, and Greece should have their money sometime by the end of November. It's all wrapping up quite neatly."

Even the euro's current resilience is unremarkable to Woolfolk.

"It all depends on whether or not you think that the euro's value is driven by economic fundamentals. It's not," he says. "It's purely trade and investment flows in the long term, sentiment in the short term."

On those terms, Woolfolk says, the euro's current levels make perfect sense. The euro zone's current account is relatively in balance, and "the euro is in a far better position, balance of payments wise, than the U.S."

Take that, greenback.

Tracking Currencies

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