After an attempted claw back early yesterday, the euro came under sharp selling pressure again over the day and overnight as markets continue to focus on euro zone debt issues. Fears that problems in Greece could impact elsewhere, despite the best efforts of policymakers to try and keep the situation under control, pushed the single currency to a low of $1.4173 late yesterday. A modest bounce was seen early morning but downside risks remain near term as markets await communication from Europe on whether or not Greece will receive additional funding support. The market also continues to price in a high probability that the country will eventually have to restructure/reschedule its debt.

The euro was also hit by a general bounce in the dollar (which rose to a three week high against a basket of currencies) on the back of a correction in commodities and stocks. Oil prices fell over 4% yesterday with an unexpected rise in gasoline stocks and slowing demand sending prices lower. Prices picked up a little overnight but hopes that the situation in the Middle East is stabilising are also weighing. The euro was also dragged lower by a fall in commodity driven currencies like the AUD, following the news of surprisingly weak Australian jobs data for April. The data have cast doubt on how soon the central bank (RBA) can raise interest rates.

Sterling found support versus the euro and USD in yesterday’s release of the Bank of England’s latest Quarterly Inflation Report, which caused markets to pull forward a little the timing of a UK interest rate increase. Gains against the dollar were short lived though, given the broad based bounce in the USD. There is much in the way of data today including US retail sales and UK industrial production.

Regards,

Tom Trevorrow
Account Manager
Tel: +44 (0)1736 335264 | SMS: +44 (0)7781 482507 | Fax: +44 (0)1736 369435
Email: Tom.Trevorrow@torfx.com | Web: www.torfx.com