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FOREX: Euro Sold as Merkel's CDU Suffers Another Election Loss

FOREX: Euro Sold as Merkel's CDU Suffers Another Election Loss

2011-09-05 07:18:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Franc, Dollar and Yen Rise as Asia Prices in US Jobs Report
  • Australian, NZ Dollars Follow Stocks Lower Amid Risk Aversion
  • Euro Slides as Merkel’s CDU Losses Another Regional Election

The Euro dropped 0.5 percent overnight following news that German Chancellor Angela Merkel’s CDU party suffered its fifth regional electoral defeat of the year, this time in Mecklenburg – Western Pomerania. The CDU took in just 23.3 percent of the vote, the least since 1990 in that state. Traders interpreted the result as an indication for waning German support for further Euro Zone debt crisis bailout efforts, pointing to increased instability.

The safe-haven Swiss Franc, US Dollar and Japanese Yen outperformed as Asian stock exchanges responded to Friday’s dismal US employment report, with shares sinking amid fears the region’s exporters will suffer as demand slows from the world’s largest economy and leading consumer market. The MSCI Asia Pacific stock index fell 2.7 percent, on pace to yield the largest daily decline in over two weeks.

The sentiment-linked Australian and New Zealand Dollars bore the brunt of the selloff in the FX space, sliding as much as 0.6 apiece against their leading counterparts. For the Aussie, economic data compounded downward pressure. TD Securities reported that Australian Inflation slowed to an annual pace of 2.9 percent in August, matching an 11-month low and adding to downward pressure on RBA interest rate expectations.

Looking ahead, S&P 500 stock index futures are deeply in the red, pointing to continued risk aversion and hinting the safe-haven bloc of currencies will continue to push higher against the other majors. On the economic calendar, the final revision of Augusts’ Euro Zone PMI Composite reading is expected to show manufacturing- and service-sector growth slowed to the weakest in three years, while the UK Services PMI gauge snaps a two-month winning streak. US markets are closed for the Labor Day holiday, so choppy price action amid thin liquidity seems likely.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

Lloyds Employment Confidence (AUG)

-66

-

-53

23:30

AUD

AiG Performance of Service Index (AUG)

52.1

-

48.8

0:30

AUD

TD Securities Inflation (MoM) (AUG)

-0.1%

-

0.3%

0:30

AUD

TD Securities Inflation (YoY) (AUG)

2.9%

-

3.2%

1:30

AUD

Company Operating Profit (QoQ) (Q2)

6.7%

2.9%

-2.2% (R-)

1:30

AUD

Inventories (Q2)

2.5%

0.3%

0.7% (R+)

1:30

AUD

ANZ Job Advertisements (MoM) (AUG)

-0.6%

-

-0.6% (R-)

2:30

CNY

China HSBC Services PMI (AUG)

50.6

-

53.5

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:45

EUR

Italian PMI Services (AUG)

48.4

48.6

Low

7:50

EUR

French PMI Services (AUG F)

56.1

56.1

Low

7:55

EUR

German PMI Services (AUG F)

50.4

50.4

Medium

8:00

EUR

Euro-Zone PMI Composite (AUG F)

50.9

51.1

Medium

8:00

EUR

Euro-Zone PMI Services (AUG F)

51.5

51.5

Medium

8:30

GBP

PMI Services (AUG)

54

55.4

Medium

8:30

EUR

Euro-Zone Sentix Investor Confidence (SEP)

-17.7

-13.5

Medium

8:30

GBP

Official Reserves (Changes) (AUG)

-

$2082M

Low

9:00

EUR

Euro-Zone Retail Sales (MoM) (JUL)

0.0%

0.7%

Medium

9:00

EUR

Euro-Zone Retail Sales (YoY) (JUL)

-1.0%

-0.7%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4083

1.4190

GBPUSD

1.6118

1.6225

For real time news and analysis, please visit http://www.dailyfx.com/real_time_news

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

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