By: Nikoletta Panteli
EUR/USD
The Euro weakened at the start of the new week against the US dollar on heightened risk aversion in the market. The pair opened at 1.2565, rose to 1.2624 and later traded near two-year lows, falling to 1.2509 (a 0.9% decline). Investors are worried about the escalating problems in Spain’s banking sector while Spanish borrowing costs remained elevated. Fears that Spain will be the next country to seek financial help from the International Monetary Fund weighed on sentiment in the market after Spain’s fourth-largest lender Bankia asked for a 19 billion euro bailout. The risk of contagion to other eurozone countries remains high and eyes are now turning to the repeat election in Greece on 17 June. The health of the global economy remains a concern but talks that China may unveil additional spending measures to support growth gave equities and commodities a boost. In Greece, the latest polls showed that Greece’s New Democracy party was ahead of Syriza, easing concerns that a Syriza victory could lead to a Greek exit from the euro. The focus now turns to Friday’s nonfarm payrolls from the US which will show the pace of recovery in the world’s largest economy. The US manufacturing index and gross domestic product figures are also expected this week.
GBP/USD
The British pound plummeted against the US dollar at the start of this week. The pair opened at 1.5679 and dropped as low as 1.5655. The political deadlock in Greece and the deepening problems of the Spanish banking sector weighed on sterling and boosted investors’ appetite for the safe haven dollar. But sterling remains fragile as investors expect the Bank of England to decide on additional quantitative easing to support the UK economy. The GDP revised figure disappointed investors after it came out worse than expected and recent economic figures showed more signs of slowing economic activity. Attention now shifts to the UK housing prices and consumer confidence data.
EUR/JPY
The single currency plummeted versus the Japanese yen this week, weighed by political uncertainty in the eurozone. Investors are concerned about a messy Greek default and exit from the euro while the yen attracts safe haven demand as uncertainty in the markets is heightened. The pair opened at 100.04 this week and slid as low as 99.50, a 0.5% decline. Industrial production and housing stats from Japan may give a picture of the economic conditions in the country.
EUR/GBP
The single currency edged lower against the British pound today, falling to 0.7982 on Monday after the pair opened at 0.8013. Sterling appears strong supported by its safe haven status as UK triple-A rated government bonds attract increasing demand while the eurozone is suffering from stagnation in economic growth. The focus remains on the eurozone periphery countries such as Spain, and fears of eurozone debt contagion weigh on the single currency.
USD/CHF
The greenback rose against the Swiss franc this week. The pair opened at 0.9562 and dropped to 0.9528 but later climbed as high as 0.9606. Deflation continues to be a threat for the Swiss National Bank (SNB) putting pressure on it to intervene in the currency markets in order to weaken the franc. The SNB set a floor at 1.20 in September for the euro versus the Swiss franc in order to protect its exports. The Swiss economy has managed to escape economic contraction and economic growth of 1% is expected for 2012.