By: Nikoletta Panteli from easy-forex
EUR/USD
The Euro weakened at the start of the new week against the US Dollar on heightened risk aversion in the market. World equities turned negative as sentiment became weighted by political uncertainties in Europe. The pair opened at 1.3208 and fell as low as 1.3104 following French President Nicolas Sarkozy’s poor results in the first round of France’s presidential vote. Sarkozy’s defeat raised fears about the eurozone’s ability to implement austerity measures in order to tackle the debt crisis.
Focus is now on the Netherlands following the Dutch’s Prime Minister cabinet resignation as talks regarding further deficit reduction measures failed to result in an agreement. The single currency remains under pressure as market players are concerned about the debt crisis in the eurozone periphery countries, such as Italy and Spain, and demand for the countries’ government bond yields will be closely watched. Economic data from the eurozone, including Germany, added further to risk aversion after Manufacturing PMI revealed softer than expected figures raising recession fears. Financial leaders from the G20 industrial and developing countries decided to boost the International Monetary Fund by $430 billion to deal with potential eurozone debt contagion but it did little to boost risk sentiment. Focus now turns to this week’s Federal Reserve’s interest rate decision and what may be interesting to observe is whether the Fed will change its policy stance in response to the poor US March employment numbers.
GBP/USD
The British Pound advanced versus the US Dollar today, following the Bank of England’s Monetary Policy Committee (MPC) meeting minutes last week. The pair opened at 1.6131 and rose as high as 1.6163. The minutes showed that Adam Posen ended his vote in favor for additional asset purchases during the bank’s last policy meeting leaving David Miles the only MPC member to vote for an increase in the quantitative easing program. Investors are now expecting the Bank of England to keep interest rates on hold and the asset purchasing program to remain unchanged. Sterling is also supported by data showing a significant improvement in the UK economy including retail sales and the employment sector. Eyes now turn to this week’s Gross Domestic Product and Housing Prices data.
EUR/JPY
The single currency plummeted versus the Japanese Yen this week weighed down by political risks in the eurozone. The pair opened at 107.77 this week and slid as low as 106.31, a 1.4% decline. The pair advanced by 3.2% during the previous week. All eyes now turn to the Bank of Japan (BoJ) interest rate decision due this week where investors expect that the BoJ may ease its monetary policy further in order to support the Japanese economy.
EUR/GBP
The single currency edged lower against the British Pound today falling to a 20-month low at 0.8143 after opening at 0.8186 on Monday. Sterling appears strong, supported by expectations that the Bank of England may not ease monetary policy further. Focus now turns to the UK GDP figures and investors will be closely watching to see whether the UK economy is avoiding recession.
USD/CHF
The Greenback rebounded against the Swiss Franc on Monday. The pair opened at 0.9096 and it climbed as high as 0.9171 before falling down to 0.9107 on Tuesday. The Swiss Franc strengthened following the higher than expected inflation data from Switzerland during the previous month. Deflation was considered a reason for the Swiss National Bank (SNB) to intervene in the currency markets in order to weaken the Franc. The SNB has set a floor at 1.20 in September for the Euro versus the Swiss Franc in order to protect its exports. KOF Leading Indicator is expected this week from Switzerland.