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.