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    European Session – Euro tumbles below 1.10 as markets await EU leaders Summit

    The euro tumbled to a five-week low against the dollar amid increasing political uncertainty surrounding Greece. Ten-year Bund yields fell to their lowest since early June and these helped pull down the euro which broke below 1.10 to reach 1.0915. Investors are nervous as there are increasing fears that Greece will leave the Eurozone after the no vote in the referendum on Sunday.

    Markets await Greek Prime Minister Alexis Tsipras to present new proposals on reforms-for-bailout aid to an emergency Eurozone summit taking place later today. Greece needs to come to an agreement soon in order to receive a new rescue package otherwise the likelihood of a Grexit will be higher.

    Meanwhile, the ECB has maintained emergency liquidity (ELA) for Greek banks at current levels but raised collateral requirements. Greek banks remain closed for a second week and capital controls remain in place.

    Data out of the Eurozone today took a back seat due to Greece headlines and did not have an impact on the euro. Industrial output in Germany posted no growth in May, for seasonally adjusted figures, after reporting a revised 0.6% advance in April and was below forecasts of 1%.

    Sterling was weighed down to a three-week low against the dollar following mixed UK data on industrial and manufacturing production data for May. UK manufacturing fell 0.6% m/m in May following an unexpected decline by 0.4% in the previous month. Expectations were for a rebound by 0.1%. Meanwhile, industrial production unexpectedly rose 0.4% m/m in the same month compared to a 0.3% increase in April. Forecasts were for a decline by 0.2%.

    The pound fell after the data to 1.5503 before tumbling even further to 1.5421 in tandem with the fall in the euro. An important event for the British currency will be Thursday’s Bank of England meeting when markets will look for clues on the Bank’s tightening expectations.

    The dollar was weighed by a stronger yen due to safe have flows to the Japanese currency. The greenback fell to 122.22 yen from 122.87 but remained within Monday’s range. It was briefly lifted after data showed the US posted a smaller rise in its trade deficit in May than forecast. The deficit came in at 41.87 billion dollars versus 42.6 billion expected and compared to a previous 40.7 billion. Better-than expected JOLTS US job openings numbers did little to halt the dollar’s decline versus the yen. Wednesday’s FOMC minutes will be closely watched for clues into the Fed’s monetary policy and timing of the first rate hike.

    In commodities, crude oil tumbled to a low of 50.68, the lowest level since April on renewed worries about excessive supply. Falling oil prices affected commodity-linked currencies like the Canadian dollar. As a result, the US dollar was up to a fourteen-week high of 1.2779 against the loonie.

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