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European Session – Euro buoyed by strong Eurozone sentiment data but Grexit remains a risk

Posted on February 9, 2015 by the XM Investment Research Desk at 3:21 pm GMT

europe-dayConcerns over Greece and China stole the focus away from Friday’s US nonfarm payrolls report. The markets soon digested the news of strong jobs data from the world’s largest economy and risk appetite was dampened on Monday by worries over China slowing down and the possibility of a Grexit. Meanwhile, geopolitical issues also grabbed market attention as the Ukraine crisis came to the foreground after German Chancellor Angela Merkel gave Russian President Vladimir Putin until February 11 to agree on a road map to end the fighting in eastern Ukraine.

As a result of risk aversion, safe havens such as the yen and Swiss Franc as well as gold, outperformed today.

China’s trade data showed exports fell 3.3% in January from a year earlier, while imports contracted 19.9%, indicating a slowdown in the world’s second largest economy.

The other main story today was on Greece. Over the weekend, new Greek Prime Minister Alexi Tsipras said that he will not seek to extend the country’s current bailout program which expires on February 28.There is a lot of concern over whether Greek and European leaders will find a way to balance austerity demands on Greece and keep financing going to avoid a potentially disastrous Greek exit.

The euro was up early in the European session on data from Germany, which showed the Eurozone’s largest economy’s trade balance widening on strong exports rising 3.4% month-over-month. Other data showed Eurozone investor confidence rose to a 9‐month high as the Sentix index increased to 12.4 in February from 0.9 the previous month. The euro rose to a session high of 1.1358 before falling to 1.1269 and then rebounding again to 1.1340. The main risk for the single currency remains from Greece, while this Wednesday’s Euro‐area finance ministers meeting will be the main market focus.

Sterling slid to test the key 1.5200 level. The main driver for the pound will be the Bank of England Inflation Report on Wednesday.

The dollar edged lower against the yen today as a result of safe haven demand propping up the Japanese currency. The pair touched a low of 118.43, down from Friday’s post-NFP high of 119.21. The US employment report showed that 257,000 jobs were created in January, beating expectations and increasing chances of a Fed rate hike by the middle of this year.

Gold prices edged higher today due to safe haven demand which helped the precious metal rise to 1243.49, trimming some losses made on Friday after the NFP report.

The US session is expected to be quiet as there are no key economic data releases scheduled. On Tuesday, the first economic data to focus on will be China’s inflation data.



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