Monday June 13, 2005 - 10:16:55 GMT
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Euro Selling Continues
European markets continued to pound the euro in overnight trade as the pair broke the 1.2100 level and set new yearly lows at 1.2060. There was no specific news to trigger the sell-off save for the continued dollar bullish sentiment from Friday’s lower than expected Trade Balance deficit which printed at -$57 Billion vs. -$58 Billion.
Market attitude towards the euro is so bleak now that the 1.2000 level seems a foregone conclusion. Despite hawkish commentary by ECB member Wellink regarding EU rates, the market is so afraid of the possibility of EU break up that it continues to dump euros at any opportunity. It is difficult to see what will turn this negative psychology around. Perhaps Tony Blair’s calming stewardship of the EU Presidency due to start in July will stabilize the market. In the meantime US eco data dominates the calendar this week with Wednesday’s TICs data and Friday Current Account report the most important news releases of the week. Although neither number is expected to be dollar bullish, it may not matter dollars bulls may continue to ignore all negative fundamentals.
On the subject of ignoring fundamentals we turn to the Swiss franc which has been a decidedly weak performer lately losing the most ground against the greenback amongst all the majors last week. This price action occurred despite the fact that gold rose last Friday in both dollars and euro’s suggesting that the market may be seeking safe harbor away from all fiat currencies. Given the fact that the Swissie has been a traditional “flight to safety” currency, this surprising divergence in CHF performance may be corrected sooner rather than later.
FX Spot Overnight
- EUR sets new yearly lows at 2060
- JPY trades just below 109 as Japanese eco data steady
- GBP nears day’s lows as inflation data suggests no cut
- CHF mirrors euro action
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