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. Economic data from the eurozone showed negative figures and sentiment weighed by political uncertainties in Europe. The pair opened at 1.3238 and fell as low as 1.3129, a 0.8% decline. Francois Hollande beat French President Nicolas Sarkozy in the first round of the nation’s presidential election and his defeat raised fears about tensions between Germany and France, and the eurozone’s ability to implement austerity measures in order to tackle the debt crisis. Investors will be closely watching this weekend’s elections in France and Greece.
Economic data from the eurozone and Germany added further to risk aversion after eurozone manufacturing revealed softer than expected figures and unemployment in Germany intensified concerns about growth in Europe’s biggest economy. Focus now turns to this week’s European Central Bank monetary policy meeting as well as Friday’s Non Farm Payrolls data. It is expected that the ECB will keep rates unchanged as inflation is still high and the recession continues. In the US, poor first quarter Gross Domestic Product, weak ADP employment data and disappointing Durable Goods Orders raised fears that this week’s NFP numbers will add to expectations for a third round of quantitative easing by the Federal Reserve.
The British Pound plummeted versus the US Dollar this week, trading below an eight month high. The pair opened at 1.6279 and rose as high as 1.6301 but fell to 1.6166 on Wednesday. The UK Gross Domestic Product surprised the markets after it showed that the UK economy contracted by 0.2% in the first quarter while a 0.1% gain was expected, confirming fears that the UK economy slid back into recession. Manufacturing PMI data was lower than expected but upbeat construction data soothed concerns about the fragility of the UK economy. Eyes now turn to Purchasing Manager Index Services data as well as Housing Prices. In a scenario where Friday’s US NFP data shows significantly higher than expected figures, Sterling may be under pressure as expectations for more easing in the US will start to fade.
EUR/JPY
The single currency plummeted versus the Japanese Yen this week weighed by political risks in the eurozone. The pair opened at 106.38 this week and slid as low as 105.12, a 1.2% decline. The Bank of Japan (BoJ) kept interest rates unchanged at 0.1% but expanded its asset purchasing program by another 5 trillion Yen to support the Japanese economy. The Yen is strong despite BoJ easing moves as the Yen attracts safe haven demand while uncertainty in the markets is heightened.
EUR/GBP
The single currency edged lower against the British Pound today falling to a 22-month low at 0.8111 from a weekly high at 0.8197 on Tuesday. Sterling appears strong supported by its safe haven status as its triple-A rated government bonds attract increasing demand. UK data was encouraging after UK construction and mortgage approvals data exceeded expectations while GDP data points to a prolonged recession in the eurozone.
USD/CHF
The Greenback rebounded against the Swiss Franc this week. The pair opened at 0.9071 and it climbed as high as 0.9157. Deflation continues to be a treat for The Swiss National Bank putting pressure on the 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.