Sentiment on the euro has been heavily impacted by extending concerns that Spain will need a full bailout.
- In early trading today, the euro dropped to a two-year low against the U.S. dollar. The pair hit 1.2086 in the late Asian session, the lowest the pair has seen in 2 years. The concerns over Spain’s finances escalated on Friday following a financial aid request from Valencia. Additionally, Spain’s government cut growth forecasts for next year and said the economy would remain in recession in 2013.
- EUR down against major currencies: EUR/USD was not the only pair to take a heavy hit. The euro dropped to its lowest in 12 years against the yen. The pair was trading down 1.01% to 94.45. The EUR/GBP traded close to a three-and-a-half year low against the pound down 0.19% to 0.7769.
- Concerns over Greece Debt are back: Greece is doubtful that they will make the debt targets that were set and it appears they are in danger of losing access bailout funding. This caused the dollar to rise against most major global currencies. The fears of Greece exiting the euro zone has left investors taking positions in safer currencies such as the U.S. dollar. Thus, Gold futures fell under pressure in early European trade.
- Earlier today the Australian Bureau of Statistics reported Ausitrali’s PPI (Producer Price Index) rose to a higher than expected reading of 0.5% in the second quarter, up from 0.3% in the preceding quarter. Although these numbers are seen as bullish for the AUD, investors did not give much thought as they snatched positions on the USD and JPY.
- Asian markets plunge: The fears on Spain’s debt bailout has caused investors to steer clear of insecure assets. Asian stock markets plunged as shares in Japan fell to a five-week low. During late Asian trade, Hong Kong’s Hang Seng Index dropped 2.6%, Australia’s ASX/200 Index declined 1.7%, while Japan’s Nikkei 225 Index tumbled 1.9%.
- Markets will most likely keep their focus on developments in Europe and Europe and the U.S. are not to release any high impact economic indicators today.
Key Highlights for the Trading Day
- 3: 00 pm GMT – Consumer Confidence Preliminary Release
Why traders care:Consumer Confidence measures the level of consumer confidence in economic activity. It is a leading indicator as it can predict consumer spending, which plays a major role in overall economic activity. The reading is compiled from a survey of about 2,300 consumers in the euro zone which asks respondents to evaluate future economic prospects. Higher readings point to higher consumer optimism. A higher than expected reading should be taken as positive/bullish for the EUR, while a lower than expected reading should be taken as negative/bearish for the EUR. Forecast = -20.0, Previous = -19.6