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Euro Declines As Risk-sentiment Eased Ahead Of Brussels Summit

Monday, 30 January 2012 | 12:39
The euro extended its Asian session decline in early European deals on Monday as the rating agency Fitch's downgrade of a few European nations last week and the caution ahead of the European Union summit to be held in Brussels later in the day trimmed last week's Fed induced risk-rally.
Market expects the EU leaders to set a final touch on the European Stability Mechanism or ESM as the EUR 500 billion permanent bailout fund will be operational in July, which is going to replace the European Financial Stability Facility or EFSF.
Greece was reportedly opposed the idea that the nation would need to surrender its budgetary control after Germany suggested to appoint a budget commissioner to manage key budget decisions in Greece. Germany's finance minister warned that the euro zone might not give Greece a fresh bailout unless it can overhaul its state and economy.
Meanwhile, Fitch Ratings downgraded the long-term issuer default ratings of Spain, Italy, Belgium, Cyprus and Slovenia over the weekend and said that substantial reforms in governance are needed to re-establish stability within the euro zone.
Thus far, Germany's DAX fell 0.94 percent, the U.K. FTSE 100 index dropped 0.80 percent and France's CAC-40 index dipped to 1.40 percent.
The European currency reached 1.2054 against its Swiss counterpart around 4:15 am ET, its lowest level since September 20, 2011. The next likely support level for the euro-franc pair is seen at 1.2030.
The euro reached 1.3130 against the US dollar around 4:20 am ET, after having challenged its 38.2 percent retracement level on Friday. The euro-buck pair is presently worth 1.3137 with 1.3010 seen as the next likely support area, at which the 23.6 percent retracement level lies in the 4-hour chart between a high on October 27, 2011 and a low on January 13.
The single currency reached 100.70 against the yen around 4:20 am ET, just a few pips short of Friday's multi-day low of 100.62. The euro-yen pair is also in a pull-back mode after having tested its 38.2 percent retracement level between a high on October 2011 and a low on January 16. The next likely support is seen at its 23.6 percent retracement level around 100.50.
The European currency is presently trading at 0.8390 against the pound, recapturing more than 10-pips from a session's low of 0.8380. The next downside target for the euro-yen pair is seen around the 0.8340 level.
House prices in the UK remained flat in January, the latest survey by property analyst Hometrack revealed today. Prices have failed to show any increase since June 2010, it said.
Looking ahead, the Italian government is set to hold a debt auction at 5.00 am ET. It aims to raise up to EUR 8 billion. The auction includes bonds maturing on March 2022 and other two maturing on April 2016 and March 2021. A new bond maturing in May 2017 is also slated for the day.
Elsewhere, the European Commission is set to publish monthly economic sentiment survey results at 5.00 am ET. Eurozone economic confidence is seen rising to 93.8 in January from 93.3 in December. Likewise, business sentiment is forecast to improve to -0.25 from -0.31 a month ago.
Germany's preliminary inflation figures for January are due later today. Economists forecast harmonized annual inflation to rise to 2.4 percent in January from 2.3 percent in December. On a monthly basis, the harmonized index of consumer prices is forecast to drop 0.4 percent.
From the U.S., personal income and spending data for December are set for release in the New York morning session.
Source: RTT News
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