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24 Jun 2013
Flash: Euro under modest downward pressure against USD - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that the euro is coming under modest downward pressure against the US dollar in the near-term with EUR/USD falling back towards support from its 200-day moving average 1.3075.
He notes that the unwinding of global carry trades following last week’s FOMC meeting is prompting an unwind of long positions in high yielding euro-zone government debt with long-term yields rising more sharply than on core euro-zone government debt leading to a re-widening of the euro-zone sovereign credit risk premium. He feels that the latest unfavourable political developments in Greece are also likely adding to uncertainty in the near-term weighing upon the euro. He writes, “The coalition government has lost its smallest partner the Democratic Left, reducing the majority of the coalition government (New Democracy and Pasok parties) to just three seats.” Still, he sees that the euro is deriving support in the near-term from improving cyclical momentum in the euro-zone with the pace of contraction easing, and the German IFO report is expected to reveal a further modest improvement.
He notes that the unwinding of global carry trades following last week’s FOMC meeting is prompting an unwind of long positions in high yielding euro-zone government debt with long-term yields rising more sharply than on core euro-zone government debt leading to a re-widening of the euro-zone sovereign credit risk premium. He feels that the latest unfavourable political developments in Greece are also likely adding to uncertainty in the near-term weighing upon the euro. He writes, “The coalition government has lost its smallest partner the Democratic Left, reducing the majority of the coalition government (New Democracy and Pasok parties) to just three seats.” Still, he sees that the euro is deriving support in the near-term from improving cyclical momentum in the euro-zone with the pace of contraction easing, and the German IFO report is expected to reveal a further modest improvement.