EUR/USD Drifting South As Sentiment Turns Risk-Off

EUR/USD Drifting South As Sentiment Turns Risk-Off


On Tuesday, EUR/USD was on the back foot at the start of trading in Europe. There was not one specific factor behind the move. European equities came soon under pressure despite a positive overhang from a strong close in the US on Monday. Poor French business confidence was not the trigger for the fragile sentiment on risk in Europe, but it didn't help. EUR/USD dropped to the 1.3020/25 area (Monday intraday support) and stayed there during most of the morning trade. Negative headlines on Spanish Q3 growth and on the Spain 2012 budget might have weighed, too. The Spanish Treasury Minister tried to provide a more positive story on the Spanish public finances, but the comments didn't change the course of events on global markets. At the onset of trading in the US, the USD succeeded another upleg inspired by a further setback in sentiment on risk, at least partially inspired by disappointing corporate earnings. EUR/USD dropped below the 1.30 big figure. The Richmond Fed manufacturing index was much weaker than expected. At the same time, European consumer confidence was marginally better than expected. The pair stayed under pressure early in US dealings reaching an intraday low at 1.2952 just after the close in Europe. The risk-off storm eased further down the road, also slowing the decline of EUR/USD. EUR/USD closed the session at 1.2987, still a decent loss compared to the 1.3060 close on Monday evening.

This morning in Asia, sentiment on risk isn't that bad if compared to the steep losses in the US and Europe yesterday. Asian markets trade mixed ‘supported' by an improvement in the Chinese HSBC manufacturing PMI. EUR/USD is holding near yesterday's closing levels.