European Equity Markets Weak On Greek Exit Concerns | May 24, 2012

Risk currencies took a deeper leg lower overnight with Euro-region dramas remaining the key directive. European equities slid amid further ‘Grexit’ concerns with benchmark indices the FTSE, CAC and DAX all falling in excess of 2 percent on the day. The bid for safety found market participant’s flock to all the likely places with German debt yields falling to records lows in a testament to the sort fear and trepidation in the market place. Fears escalated Tuesday after former Greek PM Lucas Papademos revealed contingency plans are in place in the event of a Greek departure and this theme continued overnight with reports the European Central Bank are assessing the ramifications should Greece fail in its efforts to form government.

The US dollar remained on form with solid gains recorded against the out-of-favour Euro with price action making a break to the downside of the $1.26-handle. The Euro fell to lows near two-year lows of $US1.2545 before a slight reprieve but remains under pressure below $US1.26-figure. The Australian dollar followed a similar trajectory hitting fresh 6-month lows of 96.89 US cents before finding its feet above 97 US cents and is currently buying 97.5 US cents.

The day ahead will see the focus shift to China with the HSBC Manufacturing PMI due for release. This is clearly the type of environment that could induce further short-term pressure for risk currencies, with the Australian dollar eyeing the 96.6 US cent region should today’s data undershoot estimates. Meanwhile, market participants are eyeing any feedback from a meeting of Euro-zone leaders in Brussels were its expected they attempt to strike common ground on pro-growth strategies to bring troubled nations back from the brink.