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European Session – Euro heads for biggest quarterly losses on record

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Euro1Today’s data highlights during the European session were Eurozone inflation and UK GDP.

The euro was generally weaker today, touching lows of 1.0712, due to several factors.  One is quarter-end flows and the other is Greece and whether the list of reforms submitted would be satisfactory for its international creditors to release much needed bailout money before the country goes bankrupt. Meanwhile, Eurozone inflation data today for March came in as expected at minus 0.1% on the headline y/y which was an improvement from February’s minus 0.3%. This indicated that the risk of a real deflationary spiral is limited and this helped put a brake on euro selling. On the quarter, the single currency is headed for its biggest quarterly fall on record, down 11% since January, precipitated by the launch of the ECB’s QE program.

Sterling remained weak due to election risk. However, today’s final revision of fourth quarter UK GDP data surprised higher at 3% y/y from the previous estimate of 2.7% and boosted cable to a post-data high of 1.4813 from 1.4754. However, negative sentiment remains for the pound as concerns about the May 7 general elections and recent polls show that there might not be a clear winner in the elections and there could be a hung parliament.

US data highlights today included the S&P/Case Shiller composite index of 20 metropolitan areas. The index showed prices rose in January from a year earlier, up 4.6% on a year-over-year basis, slightly outpacing December’s downwardly revised gain of 4.4%. Also a report on US consumer confidence showed a rebound in March that beat expectations.

The US dollar failed to sustain gains versus the yen after hitting an 11-day high of 120.35 in Asia. The pair slipped to a low of 119.80 and struggled to break back above 120.00.  The next risk for the dollar/yen pair will be Wednesday’s Bank of Japan Tankan survey.

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