… Politicians and economists look opposite ways
This week is marked by relevant – theoretically, at least – meetings involving the main characters of the euro zone, and their well-known agenda including the Spanish request for financial aid, and the Greek final tranche of funds directed to ameliorate its ailing accounts. But no major news is expected from them. As per usual, the tone would be the same, opposite to what the ECB utters. There won’t be any joint forces.
Radio silence from President M.Rajoy after the recent riots in Madrid against the new austerity measures plus the same attitude from the Greek government are prompting investors whether these countries have what it takes to quell the problems in their own backyard, against a backdrop of alarmingly high unemployment, lackluster economic growth outlook and weaker fundamentals. True, Spanish bond yields are not yet echoing the somber scenario, while the euro has already fallen from the vicinity of 1.3170 on September 14 to the boundaries of 1.2800 at the beginning of the present month.
… But currency analysts seem to agree
Immersed in the negative territory and extending the trend initiated on Monday, the euro is treading water in the 1.2850 region as of writing, most likely waiting for the release of the Fed’s Beige Book in the European evening as the relevant data or results in the euro zone is absent. But again, the EUR will hinge on the USD for its price action, as the uncertainties abound in the euro space, preventing the shared currency to build its own path.
Karen Jones, Head of FICC Technical Analysis at the German lender Commerzbank, assesses that the recent decline in EUR/USD would point to 1.2823/1.2750. “Technical indicators are starting to turn negative, failure to hold 1.2750 would see the market under increasing downside pressure to sell off to 1.2605 the 1.2472… “. In the same line, Jane Foley, Senior Currency Strategist at Rabobank, expects the cross to derail to the 1.2600 region in a one month view.
… The session ahead
Thursday will kick in with a measure of September’s New Loans in China, followed by the Consumer Confidence index in Japan. The euro zone will see a batch of inflation figures for Germany, Italy, Spain, France and Portugal, with mixed results expected. Unemployment data in Greece would be significant in light of the recent developments in the country. Finally, the ECB Monthly Report will also catch investors’ attention.