Euro Under Pressure On Weak Cues

Euro Under Pressure On Weak Cues


The euro remained under pressure on Tuesday as investors flee from risk-buying amid a slew of bad news out of Europe.
While slashing the AAA rating to 'negative' from 'stable' late Monday, Moody's Investors Service warned Germany, the Netherlands and Luxembourg that they may lose their coveted triple-A credit ratings due to intensified uncertainty regarding the outcome of the European debt crisis.
Moody's also said the risk of a Greek exit from the euro area has increased relative to its expectations earlier this year. A Greek exit from the monetary union would pose a material threat to the euro, it warned.
The euro remains on the defensive ahead of Greece's meeting with international creditors in Athens today to assess the country's progress in meeting official bailout targets. Speculation is rife that the country will not be able to meet its deficit targets and the troika may refuse further financial aid.
At the same time, the Spanish 10-year yield is heading towards the more unsustainable level of 8 percent, suggesting that a Spanish sovereign bailout is imminent in the near-future. The Spanish 10-year yield made a record high of 7.565 percent yesterday.
Adding to worries, flash survey results from Markit Economics showed that the Eurozone private sector economy contracted for the tenth time in the last eleven months, with the rate of decline unchanged on June.
The flash composite Purchasing Managers' Index remained unchanged at 46.4 and matched the consensus forecast. A reading below 50 suggests contraction in the sector.
While the manufacturing PMI fell to 44.1 from 45.1 in June, the services PMI rose to 47.6 from 47.1. Economists were forecasting the manufacturing index to rise to 45.2 and the services PMI to remain stable at 47.1.
The common currency that traded lower against the US dollar in the previous session broke its broader sideways trend at the beginning of the London session. With the euro-buck pair staying below the key 1.21 level, a potential re-testing of yesterday's fresh 2-year low of 1.2069 is seen in the near-term.
The euro also slipped below the 94.50 level against the yen, triggering the sell-off could challenge yesterday's near 12-year low of 94.26. The next downside target for the pair is seen around the 91.50 level.
The single currency slipped back from yesterday's 4-day high of 0.7827 against the pound in early deals, falling as low as 0.78 around 6:10 am ET. The euro-pound pair is presently worth 0.7804 with 0.7790 seen as the next likely support level in the near-term.
The number of mortgages approved for house purchases in the U.K. declined unexpectedly in June, the latest figures from the British Bankers' Association showed today.
The number of approvals fell to 26,269 in June from a revised 29,567 in May. Economists were expecting the number of approvals to rise to 31,200 from May's originally reported 30,238.
The euro moved in its familiar ranges against the Swiss franc, trading in a narrow 2-pip range as in the case for the last few months. The euro-franc pair is presently trading at 1.2012.
Looking ahead, the U.S. house price index for May and the Richmond Federal Manufacturing index for July are the major economic data due in the North American session.



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