Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
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Now that’s how you stage a come-from-behind victory! The euro took a beating early in the day as EUR/USDslumped to as low as 1.2995. However, it regained its composure once the London session began and took the pair up to 1.3137, where it ended the day with a 69-pip gain.

Surprisingly enough, the euro was able to defy gravity despite the fact that Spanish 10-year bond yields climbed above 6% yesterday (first time since November 2011!). And what a time for it to happen! Spain is set to sell up to 3 billion EUR of its 12 and 18-month bills today, and another 2.5 billion EUR of debt on Thursday. If bond yields keep rising ahead of these two major auctions, it could result in another round of risk aversion.

Take note, we also have a few heavy-hitting reports due from the euro zone later in the day.

The German ZEW economic sentiment report is slated to slide down from a reading of 22.3 to 19.7. Meanwhile, the euro zone-wide version of the index is anticipated to slip from a reading of 11.0 to 10.7. At the same time, CPI data will be available. Look for inflation to clock in at 2.6%, just as it did back in February.

If these reports all print above expectations, the euro may very well resume its rally, so be ready for potentially big moves when they come out at 9:00 am GMT!

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After getting off to a slow start, the euro was able to turn things around for the second day in a row, and close significantly higher from its lows. After hitting a low at 1.3090, EUR/USD rallied to as high 1.3173 before settling at 1.3127, down just 10 pips from its opening price. Meanwhile, EUR/JPY finished 50 pips higher to end the day at 106.18.

Bust out the champagne baby! It looks like economic conditions are improving in the euro zone! The euro zone and German ZEW economic sentiment indexes both came in exceedingly better-than-expected, printing at 13.1 and 23.7 respectively. Earlier reports were predicting figures of just 10.7 and 19.7.

This marked the fifth straight month of improvement in both reports and indicates that financial confidence in the economy is improving. Booyeah!

This, along with the good results from the Spanish bond auction, helped boost the euro yesterday. Take note though, that yesterday’s auction was for short-term bonds, which investors are much more willing to buy up as opposed to long-term 10-year bonds. Nevertheless, yields for Spanish bonds fell below 6%, which helped alleviate some of the nervousness of the market.

Moving on, headline and core CPI figures came in hotter than expected yesterday. The headline report showed inflation to be at 2.7%, which was higher than the projected 2.6% figure. Meanwhile, core CPI clocked in at 1.6%, after earlier estimates were predicting it to come in at 1.5%. With inflation coming in stronger than anticipated, it could give reason for the ECB to back off its loose monetary policy.

Only data on tap today is the current account, which will be available at 8:00 am GMT. Expectations are that the euro zone posted a trade surplus of 4.1 billion EUR last February, slightly down from the 4.5 billion EUR in January.

Still, I’m not too sure we’ll see too much of a reaction from this report, as traders seems to be focusing in on bond auctions. That said, watch out on Thursday, as our hombres from the Spanish government will holding an auction for 10-year bonds.

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EUR/USD traded in a perfect “V” pattern yesterday as it dipped slightly during the Asian and morning European trading sessions and recovered all of its losses during the European and U.S. session overlaps. The pair ended the day at 1.3116, barely changed from its opening price at 1.3127.

The economic data flow in the euro zone yesterday was pretty light as only the current account balance was published. It came in with a 1.3 billion EUR deficit, opposite the 4.1 billion EUR surplus initially expected. Moreover, last month’s figure was revised down to 3.7 billion EUR from a 4.5 billion EUR surplus.

Today could be a big day for the euro as the Spanish 10-year bond auction is set to happen. With the Spanish 10-year bond yields hitting a fresh high last week, it’ll be interesting to see how euro traders react to the auction later. If the demand is healthy, then it’s reasonable to expect the euro to strengthen.

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Phew! The euro bulls experienced huge sighs of relief yesterday when the Spanish bond auctions didn’t turn out as bad as many had expected. EUR/USD even sneaked in a 19-pip gain to 1.3135, while EUR/JPY jumped by 59 pips to 107.15. Boo yeah!

Unlike the movie Battleship, Spain’s bond auctions yesterday played out better than many naysayers had expected. Spain sold 1.45 billion EUR worth of 10-year bonds at a yield of 5.743% (higher than February’s 5.403%) and 1.08 billion EUR worth of 18-month [I]letras[/I] at a yield of 3.463% (down from February’s 3.495%).

The mixed results were received pretty well, considering that 10-year Spanish bond yields edged a bit higher at the release of the report. Heck, EUR/USD even stayed on its tight range before ending the day slightly higher than its open price!

Investors are still worried over the possibility of a contagion, of course, which is why you should keep an eye out for the IMF and G20 meetings over the weekend. Word on the hood is that IMF’s Chief Christine Lagarde is knocking on the major economies’ doors for financial contributions, which could be used to help the euro region in case of contagion. Will she meet her $400 billion goal? My friends tell me that she has currently piled a total of $320 billion.

If you want to trade the news though, you can also stay tuned for the German PPI report coming up at 7:00 am GMT, and the German Ifo Business climate coming up at 9:00 am GMT. Both reports are expected to come in a bit better than their previous figures, but make sure you stick around in case we see any surprises!

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Euro bulls celebrated 4/20 right by getting high off pips! Thanks to better-than-expected data and optimism for more funding from the IMF, EUR/USD traded past resistance at 1.3150 and closed the week 75 pips above Friday’s opening price at 1.3210.

The German PPI report for March came in higher at 0.6% than the 0.5% forecast. On top of that, Germany’s Ifo Business Climate index for April also topped expectations. The actual figure came in at 109.9 while the consensus was only at 109.6.

Aside from the positive reports, there was widespread optimism in the markets that the IMF would provide at least 400 billion USD of extra funding to the euro zone. And it looks like those giddy traders were right in keeping their hopes up for the IMF!

Over the weekend, the fund announced that it would boost the euro zone’s firepower by 430 billion USD. This should be good news for euro bulls because it would mean that there is more money to go around just in case Spain needs to get bailed out.

Perhaps economic data from the euro zone would also help sustain the positive vibes for the euro in today’s trading, so keep tabs on them!

We start things off at 7:00 am GMT when the French manufacturing and services PMI reports for April are released. Both are expected to print improvements with the consensus for the manufacturing PMI up at 47.3 from its 46.7 reading in March and the services PMI seen at 50.3 up from its previous 50.1 figure.

Then at 7:30 am GMT, it will be Germany’s turn to release its economic data. Its manufacturing PMI is eyed at 49.0 while the services PMI is anticipated at 52.4.

A few minutes later, at 8:00 am GMT, the euro zone manufacturing PMI will be on tap and it has been predicted to come in at 48.1. The region’s services PMI for April will also be released and it is eyed at 49.4.

Better-than-expected figures may just help the euro extend its gains so make sure you don’t miss the reports later!

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Ooomph! The euro received a roundhouse kick from its major counterparts yesterday after weak economic data, political scuffles, and contagion concerns hit the euro region. EUR/USD even dropped to an intraday low near 1.3100 during the U.S. session! What the heck happened?

If you answered political problems in the region, then you already score one for three. Apparently, investors were bothered when Dutch Prime Minister Mark Rutte and his Cabinet resigned after failing to reach an agreement on austerity over the weekend. You see, credit rating agencies have been knocking on Netherland’s doors for stricter austerity measures.If situations get worse over the next couple of days, then the euro region might lose another AAA-rated economy!

Of course, it also doesn’t help that France’s Sarkozy lost the first round of elections to his rival, Francois Hollande. Hollande is a known advocate for economic growth over austerity measures, so he might shake the euro region’s plans up if he wins the elections.

Another reason why the euro bears sold the currency like there’s no tomorrow is that the economic reports released yesterday missed investors’ expectations. France, Germany, and the euro zone all released their manufacturing and services PMI| numbers. Aside from France’s manufacturing and Germany’s services data, ALL reports printed lower than their previous figures. In fact, Germany’s manufacturing report even fell to its lowest level in 33 months! Yikes!

It also doesn’t help growth concerns in the region when 10-year Spanish bond yields inched closer to the important 6% mark. The yields reached 5.945% yesterday, which fueled concerns that Spain might be the next Greece. Remember, 10-year yields were at around 7% when the other major euro economies asked for bailouts!

Will the euro bulls snatch back some pips today? Only the industrial new orders report at 10:00 am GMT and the Belgium NBB business climate report at 2:00 pm GMT are due for today, so make sure you keep an eye on any political/economic report that might influence risk sentiment!

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Whoa! It looks like the euro was able to shrug off disappointing data like a boss yesterday. EUR/USD ended the day 35 pips higher at 1.3187. Meanwhile, against the yen, the euro gained 47 pips as EUR/JPY closed at 107.21.

Euro zone industrial new orders printed a 1.3% contraction for February and disappointed the market’s expectations which was for a 1.4% uptick. The Belgium NBB Business Climate index for April also failed to impress when it showed that business conditions in the country are worse than what analysts had anticipated. The actual figure came in at -10.7 while the forecast was for a more modest contraction at -8.3.

On top of those reports, the political crisis in the Netherlands also seems far from over! In fact, the parliament is due to receive another set of austerity measures today and a few market junkies are worried that more policymakers could walkout.

Luckily for the euro, Spanish bond yields remained below 6% yesterday. Whew! It also seemed like investors were more concerned about the upcoming FOMC statement than disappointing euro zone data and the Netherlands. Some economic reports released from the U.S. yesterday also fell short of expectations. Consequently, these got some traders worried that Fed Chairman Ben Bernanke could show his dovish side in today’s statement.

With that said, be sure you keep an ear out for what the Fed head honcho has to say as the statement could possibly spark some volatility on USD pairs.

ECB President Mario Draghi is also scheduled to talk today at 7:00 am. Be on your toes for his remarks about the EU economy. If markets sense pessimism from him, we may just see the euro get sold off.

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EUR/USD managed to finish near its highs yesterday, thanks to Federal Reserve Chairman Ben Bernanke’s optimistic comments on the U.S. economy. The pair ended the day at 1.3220, 33 pips higher from its opening price during the Asian trading session.

According to Big Ben, the Federal Reserve has decided to keep rates unchanged near zero until late 2014 but due to the improved economic situation, they have also upgraded their outlook. The central bank now believes that growth will be around 2.4% to 2.9% for this year, up from the initial forecast of 2.2% to 2.7%.

In other news, Mario Draghi, the European Central Bank (ECB) President, went on the wires and said that indicators for the first quarter of this year show that the economy has stabilized at low levels. He also said that growth would be supported by foreign demand, very low interest rates, and unconventional stimulus measures. As for inflation, he mentioned that it would likely stay above 2% for this year before falling below 2% next year.

Today, the only red flag on the euro’s forex calendar is the German Preliminary CPI. The expectation is a 0.1% inflation rate, down from last month’s 0.3%. If the actual number comes in higher than expected, we could see the euro rally, as it could pressure the ECB to hike rates earlier than they would want to.

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Boy, does the euro know how to be sneaky! Despite the lack of economic reports, it tapped a new high against the dollar for the week yesterday at 1.3264. By the day’s close, EUR/USD was up 18 pips from its opening price at 1.3238.

Only the German preliminary CPI report for April was on the docket for the euro yesterday and it came as no surprise when it printed as expected at 0.1%.

Italy also had a bond auction of its 6-month bills with yields rising to 1.772% from 1.119% in March 28. Higher borrowing costs should’ve been bearish for the euro. However, it seemed like Fed Chairman Ben Bernanke’s dovish words from the FOMC Statement still lingered in the markets and muted effect of the rise in bond yields.

With another Italian bond auction scheduled for today, will the euro still be able to get away with another win?

Err, I’m not really sure. So be on your toes during the London session later! The government is looking to sell 6.25 billion EUR worth of 5- and 10-year bonds. Analysts think that Italy will meet the demand it needs but they are worried about the yields rising. If borrowing costs increase significantly from the 5.57% yield that we saw in Italy’s previous sale of 10-year bonds, the euro could get sold-off.

Aside from the bond auction, be sure to also keep tabs on the reports that we have on tap from the euro zone today as they could also affect the currency’s price action.

At 6:00 am GMT, the German GfK consumer climate index for April is anticipated to show that financial confidence among consumers remained the same as in March with the index eyed to match its previous reading at 5.9.

A few minutes later, at 6:45 am GMT, data on French consumer spending is expected to show a 1.6% decline in March.

Keep in mind that better-than-expected figures could help the euro rally while disappointing numbers could spark a sell-off. Good luck!

735

Can we just call the euro the Comeback Kid?? After dropping to as low as 1.3157 last Friday, the euro made a late comeback versus the dollar and managed to finish at 1.3237, marking just a 2-pip loss on the day.

Economic data out of the euro zone last Friday had a slightly bearish vibe, as both the German Gfk consumer climate index and French consumer spending figures came in worse-than-expected.

German consumers are less optimistic about the financial outlook of the economy, as the index came in at just 5.6, after it was projected to post a figure of 5.9. Meanwhile, French consumer spending dropped by 2.9%, after it was anticipated to drop by just 1.6%.

Italian bond auctions also came up short, as Italy was only able to sell 5.95 billion EUR worth of 5-year and 10-year bonds. What was more disturbing though is that the average yield propped up to 5.84%, which was nearly 30 basis points higher than the last time Italy sold 10-year bonds.

Remember, rising yields means that investors are becoming more doubtful on whether a government can make good on its debt. The bigger the concerns, the higher bond yields become. If we continue to see yields soar, it would trigger another round of contagion fears.

The biggest news last Friday though, was that our buddies over at S&P downgraded Spanish debt by two levels down to BBB+ and slapped a “negative outlook” on the country as well! The rating agency cited economic conditions and a weak banking sector as the reason for the downgrade.

Still, all the poor news didn’t stop the euro from remaining afloat versus the dollar. Will the euro continue to stave off the bears attack or will the bears finally push through?

For today, we’ve got a couple of second tier reports that could dictate euro trading.

First, at 6:00 am GMT, euro zone retail sales figures will be made available. My homies on the street tell me that retail sales rose by 0.8% last month, which would be a nice reversal from the 1.1% decline we saw the month before. If this comes in better-than-expected, it may just give the euro some nice support.

Later on, we’ll get some inflation data in the form of the CPI flash estimate at 9:00 am GMT. Expectations are that inflation clocked in at an annualized rate of 2.5%, which would be slightly lower than last month’s 2.6%. I don’t expect this to rock the market too much, but if it does come in lower-than-projected, it may just give the ECB more wiggle room for more creative monetary policy.

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Hmmm, it looks like the euro is off to a relatively good start. After EUR/USD fell from its intraday high of 1.3268, the pair was still able to pare its losses and close the day 3 pips above its opening price at 1.3237. It might not be much, but a win is a win, right?

Yesterday, we found out that Spain is in the same rut as the U.K., officially falling into recession. The country’s Q1 GDP 2012 matched its previous reading for the last quarter of 2012 at -0.3%. Yikes! Luckily for the euro, market participants had braced themselves enough for the report and the news of recession didn’t come as a surprise.

Germany’s retail sales report for March also didn’t catch anyone off-guard when it came in as expected at 0.8%.

A lot of economic gurus feel that the euro has Lady Luck to thank for its 3-pip win yesterday because U.S. data came in mixed and affirmed the Fed’s plans of providing the economy with more stimulus.

Today our forex calendar is blank for reports from the euro zone because of Labour Day. However, we do have a couple of top-tier reports from the U.S. that could affect EUR/USD’s price action today. So be sure you don’t miss 'em!

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With euro zone markets closed in celebration of Labour Day, EUR/USD spent the entire day chilling on the charts. As a matter of fact, after 24 hours of trading, it finished just 2 pips lower at 1.3239, forming a third consecutive doji on the daily chart! Will this pair finally bust a move today?

There’s certainly a chance, homies! Volatility could pick up later in the day and the euro could break out of consolidation as European traders pour back into the markets.

Also, we’ve got a couple of employment reports on deck that could budge the markets. German unemployment data is due at 7:55 am GMT, and survey says we’ll see a decrease of 9,000 in the number of unemployed individuals in April, a soft followup to the 18,000 decline in March.

Then at 9:00 am GMT, we’ll take a look at euro zone-wide employment, as the unemployment rate is slated to rise from 10.8% to 10.9%.

And just in case you wanna catch the final manufacturing PMI (expected to remain at 46.0), tune in at 8:00 am GMT when it’s scheduled to come out.

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With poor economic data from the euro zone and risk aversion settling in markets yesterday, can you blame the euro bears for attacking? EUR/USD ended the day with an 84-pip loss at 1.3156, while EUR/GBP edged closer to its 2-year low at .8121.

The euro came back from the holidays on the wrong side of market sentiment as weaker-than-expected German employment figures greeted the day. The data showed that 19,000 workers went jobless in April, which missed expectations of a 9,000-increase in jobs.

Unemployment rates in Italy and the euro zone also disappointed expectations. Unemployment in the euro region reached a 15-year high at 10.9% in March, while Italy’s jobless rate also rose from 9.6% to 9.8%. Meanwhile, manufacturing PMI in the euro zone slipped to 45.9 after showing a 46.0 reading in March.

Today we’ll see the region’s PPI report at 10:00 am GMT. However, all eyes will be on the ECB at 11:45 pm GMT when it announces its interest rate decision. Market gurus aren’t expecting a rate cut this month, but they’re gonna be watching if ECB head honcho Mario Draghi will hint at any monetary easing efforts in the near future. Recall that since its last interest rate statement, economic reports from the euro zone have been showing weaknesses.

Oh and don’t forget to keep tabs on the French and Spanish bond auctions also due today, will ya? Word in the hood is that investors are finding it harder to buy bonds from Spain (which had just been downgraded to BBB+ by the S&P) and France (which is about to hold a presidential election). Stay sharp in your trades, homies!

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What an eventful day for the euro! With the Spanish bond auctions and the ECB rate statement going on, euro pairs were just all over the place as volatility spiked during the London session. How did those events turn out?

First up, the Spanish bond auction gave mixed results as they were able to reach their target bond sales but ended up having to pay higher yields. French bond auctions, on the other hand, were much more successful as borrowing costs declined for euro zone’s second largest economy. French 10-year bond yields were down from 3% to 2.92%, easing funding concerns in the euro zone and keeping the euro afloat against its major counterparts.

The ECB monetary policy decision also lifted the euro’s spirits as ECB President Mario Draghi made no mention of rate cuts or any kind of further easing AT ALL. The central bank kept rates on hold at 1.00% as expected as ECB policymakers still seem to be in a wait-and-see mode. With that, the euro was able to keep its head up, with EUR/USD closing only 3 pips below its 1.3156 open and EUR/JPY ending 2 pips up from its 105.44 open price.

Only the retail sales report for March is set for release from the euro zone today and this probably wouldn’t have much of an impact on the euro’s movement unless the actual figure comes in way worse or much better than the expected 0.1% uptick. Also keep an eye out for the upcoming NFP release or, better yet, read up on Forex Gump’s NFP preview if you’re planning to trade EUR/USD. Good luck!

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Yowza! After dropping 64 pips on Friday to close at 1.3089, EUR/USD has gapped down over 50 pips and is now sinking below the 1.3000 handle! Could this be a sign of more losses for the shared currency this week?

The euro has taken a hit over the past couple of days for a number of reasons.

First was the dismal U.S. non-farm payrolls report, which triggered a massive wave of risk aversion last Friday. Make sure to hit up my U.S. commentary for more details on that report homies!

Second, France now has a new president, Mr. Francois Hollande. Questions on whether he can get along with Germany and Chancellor Merkel and his lack of political experience may lead to some political instability, which is why some market players have decided to dump their euros.

Third, we’ve now got some political rumblings out of Greece, as Syriza is now ahead of the Socialist Pasok party and second in the overall rankings in the race for Parliament. The problem with this is that Syriza is anti-austerity and this could prove to be a stumbling block for Greece to receive bailout funds. Yikes!

Fourth, we can’t forget that the ECB recently released its interest rate decision but failed to establish whether or not it would be cutting rates. This has led to some uncertainty in the markets and has made the euro weaker across the board.

The only bit of good news we got last Friday was that euro zone retail sales came in slightly better-than-anticipated. Retail sales rose by 0.3% last month, after it was expected to have shot up by just 0.1%. Nevertheless, this was received just like a Ben Affleck performance. Sorry Ben, but you just got no game playa!

For today, we’ve got some second tier reports in the form of the Sentix investor confidence index and the German factory orders report, which are set to be released at 8:30 am and 10:00 am GMT respectively.

Investor confidence is expected to deteriorate further and print at -15.3, which would mark a downtick from last month’s -14.7 reading. Meanwhile, factory orders growth is seen to rise from 0.3% to 0.5% over the past month. Still, I doubt these reports will have much of an effect on the markets.

Instead, I suspect that the markets will be focusing on the French and Greek elections and the aftermath of the NFP report.

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The euro may have been off to a shaky start as both EUR/USD and EUR/JPY gapped down over the weekend, but these pairs managed to fill part of those gaps on Monday. EUR/USD opened at 1.3034, dipped to a low of 1.2955, then closed at 1.3057.

Euro zone economic reports came in mixed yesterday while political uncertainty in the region also affected the currency’s movement. First up, the Sentix investor confidence index for the euro zone missed expectations and printed a -24.5 reading, much lower than the estimated -15.3 figure and the previous month’s -14.7 reading. Later on, Germany posted a 2.2% increase in factory orders for March, way better than the consensus of a 0.5% uptick. On top of that, the previous month’s figure was revised upwards from 0.3% to 0.6%, giving the euro another boost.

Only the German industrial production report is on the euro zone’s agenda for today, and the report is expected to show a 0.8% increase for March. However, if the actual figure misses expectations or even posts another decline for the month, the euro could be forced to give up its recent gains. Keep an eye out for the actual figure due 10:00 am GMT.

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Yowza! The political uncertainty in Europe really did a number on the euro as the currency erased all of its gains from Monday. Surprisingly, both EUR/USD and EUR/JPY slid 45 pips lower yesterday! And who do we have to blame for the bearish sentiment for the euro? Greece!

It seems investors are shying away from the euro once again as political uncertainty continues to cloud the release of the next tranche of Greece’s bailout package. Some say that if Greece fails to put together a new government and pass new austerity measures, we could even see Greece get booted out of the euro zone! Ouch! To learn more about the iffy Greek situation, I suggest y’all check out Forex Gump’s blog. He wrote an interesting piece about the possibility of a “Grexit” that should fill you in on everything you should know.

In other news, the markets appear to have ignored Germany’s strong industrial production report, which printed a 2.8% increase in output instead of the 0.8% uptick that most had predicted. The previous month’s 1.3% decline was also revised upwards to a 0.3% slide. From where I’m standing, this just highlights the growing divide between Germany and the rest of the euro zone. While its neighbors are suffering from weak economic activity, Germany is chugging along solidly!

The only reports on tap for today will come in the form of German and French trade balance data. These probably won’t have much of an impact on euro price action, but they could be worth catching just in case they print huge surprises. You can catch the German trade balance (seen at a surplus of 13.4 billion EUR) at 6:00 am GMT, and the French trade balance (seen at a deficit of 5.8 billion EUR) at 6:45 am GMT.

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So long 1.3000! EUR/USD had been able to close above the major psychological handle for a couple of times in the past few months, but it looks like the euro didn’t have Lady Luck on its side yesterday. The pair tapped its 4-month low at 1.2911 before ending the day at 1.2947, 65 pips below its opening price.

The political drama surrounding Greece continued to weigh down on the shared currency. Yesterday, a couple of German officials hinted that their patience is already running low for the debt-ridden country. It was announced that only 4.2 billion EUR of the 5.2 billion aid package for Greece will be released for now. Whether or not the Greeks will get the remainder of it will be determined by the government’s ability to implement the previously-agreed austerity measures.

And as though the news wasn’t enough to upset investors, Spanish bond yields spiked above 6% too which only sparked funding concerns for the region’s fourth largest economy. Yikes!

It seems that risks of a Grexit and a contagion still remain to be the primary driving factors behind price action. But I wonder if perhaps economic reports from the euro zone will be able to sooth investors to some extent and help the euro pare some of its losses. Well, that is if they come in better-than-expected.

Today’s roster of economic data start off with the French industrial production report for March at 6:45 am GMT. It is eyed to come in at -0.4%.

Then at 8:00 am GMT, we’ll have the ECB monthly bulletin on tap. The report details the statistics reviewed by the central bank before it made its most recent interest rate decision as well as its economic outlook. If it proves to be more hawkish than expected, we could see the the euro rally. So watch out!

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Just when it looked like euro pairs were revving up for a bounce, risk aversion popped its head back in the markets and kept the euro’s gains in check. Still, EUR/JPY deserves mad props for putting an end to its losing streak and ending 40 pips up from its 103.09 open price. EUR/USD managed to trim its losses and close only 4 pips down from its 1.2948 open price.

Euro zone economic data came in mixed yesterday as France printed weaker than expected industrial production data while Italy chalked up a surprise 0.5% uptick in its version of the report. What really moved the euro yesterday was the drop in Spanish bond yields, helping alleviate funding concerns for euro zone’s third largest economy.

However, it wasn’t long before Greek political problems took center stage and weighed on the euro again. As it turns out, the odds aren’t looking too good for a coalition government yet many are hopeful that the third try would be the charm for Greece. Otherwise, they’d have no choice but to hold another round of elections next month, which would mean more political uncertainty for the country and more volatility for the euro.

There are no economic reports due from the euro zone today, which means that euro pairs could be moved by risk sentiment and news from the euro zone, particularly in Greece. Stay on your toes!

745

For the seventh time in eight trading days, the euro finished weaker last Friday, as EUR/USD closed 21 pips lower at 1.2923. For the week, EUR/USD finished just over 100 pips below its weekly opening price. Will the euro continue to slide down the charts this week or can it make an unlikely comeback?

The major reason why the euro took an old school, back-alley beating last week was due to concerns surrounding Greece. With the New Democracy, Syriza, and Pasok political parties failing to form a coalition government, the chances of a Grexit are becoming higher than if you were to bet on the outside lines on a roulette table!

For today, we’ve got euro zone industrial production figures due at 9:00 am GMT. Expectations are that production picked up by 0.6% in March, which would be a nice follow-up to the 0.8% uptick we saw in February. If this comes in better-than-expected, it could provide the euro some nice support to go on a Monday rally.

Don’t forget that we’ve also got some Italian bond auctions during today’s London session. It should be interesting to see whether all the recent developments in the euro zone have taken its toll on Italian yields. Take note that the last auction resulted in yields of 5.84%. If we start seeing Italian yields creep back above 6.0%, it may trigger another run of risk aversion in the markets!