Euro Selling Spree Continues On Potential Risk Events

Euro Selling Spree Continues On Potential Risk Events


The euro was a clear underpeformer in early deals Monday despite the region's economic data faring fairly well, as the markets focus on potential risk factors that come into the spotlight in the unfolding week.
Traders shrugged off data showing eurozone's trade surplus that rose more than predicted to EUR 6.9 billion in May. Eurozone's inflation was stable at 2.4 percent in June, German manufacturing employment increased to 5.2 million in May and the Italian trade balance came almost in line with market expectation.
Instead, the positive sentiment was overshadowed by concerns about an impending Chinese economic slowdown, a slew of key U.S. corporate second-quarter earnings, Spanish bond auctions and Fed Chairman Ben Bernanke's congressional testimony due this week.
German Chancellor Angela Merkel said the question of liability for future aid to troubled banks in Europe has not yet been decided.
Chinese Premier Wen Jiabao warned that the country's economic rebound was not yet stable and economic hardship may persist for a while.
At the same time, Wen's warning spurred speculation of more stimulus measures and monetary easing as the Premier said that the government would "fine tune" policy in the second half to support growth.
The market participants are also waiting for Bernanke's semi-annual testimony before the U.S. lawmakers on the state of the economy.
The markets are seeking clues on the Fed's stance regarding a stronger monetary policy to support the U.S. recovery. Bernanke said on June 20 that policymakers would be prepared to take additional steps if necessary, including additional asset purchases.
Central banks in Europe, China, Brazil and South Korea have lowered their benchmark interest rates this month, while the Bank of Japan unexpectedly expanded its asset-purchase program, its main monetary policy tool.
Around 5:45 am ET, the euro fell below 0.7850 against the pound for the first time since November 2008. The euro-pound pair is presently trading a few pips short of its key support zone at 0.78/0.7840.
Against the yen, the common currency depreciated by more than 1 percent to a 1-1/2 month low of 96.21 around 5:30 am ET from its early Asian session's 4-day high of 97.23.
The euro also extended its descending channel pattern against the US dollar in early deals, falling almost 0.7 percent to reach a low of 1.2182 from its early Asian session's 5-day high of 1.2265.
At the same time, the euro-franc pair barely moved out of its familiar ranges, trading tightly between 1.2014 and 1.2010.
Looking ahead, the U.S. retail sales for June, the results of the New York Federal Reserve's manufacturing survey for July and business inventories for May are expected to garner market attention in the New York morning session.


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