The Euro fell back down below 1.2400 against the Buck following the announcement that Eurozone Consumer Price Index fell from 2.6% to 2.4% in May.
As markets continue to digest the news that there is a €23 billion hole in the accounts at Bankia – Spain’s fourth leading lender – global appetite for risk is swiftly declining. It seems that hungry investors are keen to purchase cheese burgers and hotdogs (US Dollar) but they just can’t seem to stomach the thought of paella (Euro) or fish and chips (Sterling).
The US Dollar benefitted from its safe haven status yesterday and managed to knock the Pound below support levels as far down as 1.5465. The Buck also beat-up the Euro pretty badly and sent EUR/GBP to lows not seen for over two years in the region of 1.2357. The Pound managed to hold its own against the Euro and maintained a strong level above 1.2500 as Sterling also received defensive inflows from the 17-nation bloc.
The situation in Spain worsened as the banking sector crisis showed no signs of recovery, and plans to recapitalise Bankia continued to elude policy makers. Spanish shares dived to 9-year lows, and investors treated Spanish government debt with extreme caution; the yield on 10-year bonds jumped increasingly close to the 7% level which is generally considered unsustainable.
The Euro was dealt another blow as the latest round of Greek exit polls seemed to suggest that Alexis Tsipras’ leftwing anti-austerity SYRIZA coalition are currently ahead of the pro-bailout New Democracy party. The single-currency fell sharply on the news as Greek exit fears battled with Spanish banking concerns to hold the coveted title of ‘Most threatening issue to the future of the Eurozone’.
The Euro rallied slightly this morning against both the US Dollar and the Pound following the release of some Euro-era record low unemployment data in Germany, but these gains were swiftly reversed as Eurozone CPI inflation fell further than expected.
Later on today Ireland will vote on the EU fiscal compact, it is a tough task for the Irish because if the compact is implemented it will ensure that the short-term pain of austerity is heightened, but if they reject the policy agreement then Ireland will not have access to the ECB’s European Stability Mechanism Fund which offers financial support to countries who cannot borrow in the debt markets.
The Euro to US Dollar exchange rate edged up from its 2-year lows this morning to rest just above 1.2400 as unemployment in Germany dropped to 6.7% – the lowest level since records began in January 1991. The resilient and robust German labour force is miles ahead of the rest of Europe, where the average unemployment rate is 10.9% – which in itself is a 15-year high and marks an important factor in the vast gap in Eurozone competitiveness.
The Euro fell back down below 1.2400 against the Buck following the announcement that Eurozone Consumer Price Index fell from 2.6% to 2.4% in May. However the US Dollar could encounter some selling pressure this afternoon if investors feel that first quarter downward revisions or the ADP employment report offer the sufficient stimulus to call the Fed back into action. The Euro could possibly rally back towards 1.2500 if the potential for QE3 is realised.
Data Released Today
06:00 – UK – Nationwide House Prices (YoY) (April) -1.1%
07:55 – EUR – German Unemployment Rate (May) 6.8%
09:00 – EUR – Eurozone Consumer Price Index (YoY) (May) 2.5%
12:15 – US – ADP Employment Change (May) 150K
12:30 – US – Gross Domestic Product (Annualized) (Q1) 1.9%
- The Pound is trading slightly down from yesterday at 1.208 against the Euro exchange rate
- Sterling Euro US Dollar NEWS FLASH – The Pound has rallied strongly against the majors this morning
- Pound Vs Euro US Dollar Currency News Flash – The Pound initially rallied against the majors this morning
- Pound Sterling, the Euro and US Dollar exchange rate News Flash – The Pound received a timely boost this morning
- Pound Euro US Dollar Exchange Rate Forecast – The Pound has declined heavily against the majors this morning