The EUR/USD continued to decline today, closing at 1.2517. Rising economic risks along with uncertainty over demand on the back of downgrade in global growth forecasts, will lead to downside pressure on the euro in coming days. The DX is expected to strengthen.
Comments by Italian PM Mario Monti were being fingered as having provided the motivation for a lift to the risk trade in that he stated that the majority across the EU support joint Eurobond issues and that Germany’s opposition could be overcome. It seems the market was a little too quick to inject some optimism here as equities have since turned negative again and probably for good reason. For one thing, Monti’s account of the EU Summit sharply differs from that provided earlier by Luxembourg PM Jean-Claude Juncker who said that eurobonds have no support in the German influenced regions as an offset to support within France. For another, German Chancellor Angela Merkel reiterated opposition to eurobonds and this stance has been supported by the opposition. What markets are latching on to is that her government has, however, agreed to study a “redemption fund” proposal.
The overall day was thin on eco data and news flows were at a minimum.
Volume was light in the US session as it is a long 3 day holiday weekend with US markets closed on Monday.
Reports that China’s leading banks may fall short of loan targets for first time in 7 years nudged the renewed mood. It remains to be seen in the coming days how the situation transpires in Europe as exit of Greece seems almost looming at this point in time.
The week has seen encouraging numbers from the U.S but the situation in Europe continue to weigh on investors. Next week could give a better indication of the U.S economic recuperation with the Nonfarm payrolls data scheduled for release. Also in line, next week is the U.S GDP figures; both heavyweight numbers could have a significant bearing on the currency and commodity prices. The recent string of weak numbers from China is raising fresh concerns about the pliability of the Chinese economy amid softening global demand and in that regards, policy easing from China could be on cards in the coming days.
Bangkokline provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports
Economic Data for May 25, 2012 actual v. forecast
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