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Fed Speculation Still in Focus, Euro Uneasy on Spain Election

Fed Speculation Still in Focus, Euro Uneasy on Spain Election

Talking Points:

  • Euro Gaps Down at Weekly Open After Spain Election Outcome
  • Fed Rate Hike Path in Focus on US GDP, Durables and PCE Data
  • US Dollar Risk on the Upside, Gold and Stocks Look Vulnerable

The Euro gapped down at the weekly trading open after Spain’s Prime Minister Mariano Rajoy and his PP party lost parliamentary majority at a general election held over the weekend. This opens the door for coalition negotiations that may bring the eurosceptic, anti-austerity Podemos party into government.

Looking ahead, revised US GDP figures as well as Durable Goods Orders and PCE data will drive speculation about the 2016 path of Fed rate hikes. Markets are positioned more dovish than the central bank's own projections, putting surprise risk on the upside for the US Dollar in the event that firm results force traders to reconsider. Such outcomes may also weigh on gold and undermine market-wide risk appetite.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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