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Euro vulnerability remains intact

FXstreet.com (Barcelona) - After dipping to fresh 2013 lows around 1.2750 in recent weeks, the single currency tried to pick up pace and recover at least the levels surrounding the key 200-day moving average around 1.2880/85. The euro succeed at first hand, after a tug-of-war against the increased Cypriot based pessimism and the rising fears of contagion spreading to the rest of the peripheral members, namely Spain and Italy. Well, although the Cyprus issue is not over yet - let alone solved – the late manufacturing PMI prints reminded investors how fragile the euro bloc fundamentals remain, casting shadows over the next Q1 GDP figures.

… ECB inaction priced in?

The ECB will hold its monthly gathering on Thursday, although market participants have already ruled out any modifications to its monetary policy. However, the Q&A session promises to bring in some fireworks regarding the last developments in Cyprus and the current weakness in the euro bloc. Furthermore, the fresh vulnerability of the deposits – formerly considered ‘sacred’ – would be on centre stage, with Draghi expected to be bombarded by questions regarding that matter and the potentiality of its contagious effects.

It now seems that the recovery flagged by President Draghi and other members of the EU for the first half of the year would have to wait a bit longer to materialize, as recent tepid data cannot be ignored.

Another open front remains Italy and its inability to spark the minimum form of government, as Bersani, Grillo and Berlusconi continue to look for themselves and rule out any possibility of coalition.

When comes to technicals, Analyst Karen Jones at Commerzbank comments, “EUR/USD has spent the past few days consolidating below its 200 day ma and as a consequence maintains a negative bias. It remains on course for 1.2679/61, this is the 61.8% Fibonacci retracement of the July-to-January rise and the November 2012 low meet”.

European markets higher ahead of central banks and US NFP this week

The German DAX 30 (+1.30%), the French CAC 40 (+1.20%), the Italian FTSE MIB (+0.57%) and the Spanish IBEX 35 (+1.09%) are edging higher on Tuesday, like most European equity indexes, as investors get ready for a festival of central bank policy meetings this week, including the ECB, BoJ and BoE, and US nonfarm payrolls data on Friday.
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Forex Flash: What lies ahead of EUR/USD? – Commerzbank, Westpac and UBS

The single currency is trading on the back foot on Tuesday, partially retracing Monday’s gains and hovering over 1.2830/35. The lacklustre results from the manufacturing PMI in the euro zone...
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