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Uncertainty Plagues Markets, EUR/USD and GBP/USD Extends Yesterday’s Decline

Uncertainty Plagues Markets, EUR/USD and GBP/USD Extends Yesterday’s Decline

2010-05-25 10:40:00
Michael Wright, Currency Analyst


Fundamental Headlines

• Europe’s Banks Hit by Loan Costs  – Wall Street Journal
• European Stocks Track Asia Selloff  – Wall Street Journal
• Political and Euro Crises Spook Investors  - Financial Times
• Euro Falls on Concern Spain’s Bank Woes Signal Crisis Spreading; Won Drops - Bloomberg
• Greece May Put SNB’S Hildebrand on Losing Side of Franc Intervention  Fight - Bloomberg

EUR/USD – The euro has extended yesterday’s decline against the U.S. dollar and now looks poised to test pivot support at 1.2102 in the near term as weakness in the Spanish banking system fuel’s speculation that Europe’s financial institutions may face additional losses. The southern journey in the euro maybe far from over as the International Monetary Fund urged Spain to do more to overhaul its ailing banks. Meanwhile, European industrial new orders jumped 5.2 percent in March after climbing a revised 1.9 percent the previous month. The advancement in orders from the sixteen nation euro area marks the highest increase in approximately three years as the euro free falls, thus making European goods more competitive abroad.  Looking ahead, risk aversion is likely to remain the key theme for most of this week as market participants continue to add pressure onto the single currency as the European debt crisis lingers. To discuss this and other topics, please visit the EUR/USD forum.

GBP/USD – Economic Activity in the U.K. rose more than previously forecasted in the first quarter amid a rebound in investment, while manufacturing expanded at the fastest pace in four years. Figures showed that gross domestic product in the world’s sixth largest economy pushed 0.3 percent higher from the three months through December, while manufacturing soared 1.2 percent, largely due to fact that that the weakness in the sterling has made British exports cheaper. Meanwhile, Bank of England policy maker Adam Posen stated that he can see “the end of the road” for Britain’s fiscal stimulus and  he later went onto add that the nation is “aware” of the risks to extending it too long. Nevertheless, policy makers are likely to keep rates near zero as risks to the U.K. have grown recently as Greece’s fiscal crisis continues to spread across Europe, while the central bank expects inflation to hold slightly above 2% this year as the slack in the economy tapers consumer prices. Going forward, market participants are likely to continue to weigh down on the British pound as Greece’s debt crisis spreads like Ebola.To discuss this and other topics, please visit the GBP/USD forum.

Written by Michael Wright, Currency Analyst
To Receive Future Articles by Email, please contact me at instructor@dailyfx.com
Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and
Forex Trading Weekly Forecast


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