Euro to Drift Weaker

There will be something of a lull in US trends in the very short term with markets awaiting further economic data later this week. The main focus is likely to be on the Euro-zone economy and Euro in the near term. Positive news will push the Euro higher at times, but there are still very important underlying weaknesses and the underlying vulnerability is still likely to trigger an overall weakening in the currency, especially with tensions liable to spread to other weaker economies. Overall, the Euro is liable to drift weaker towards the 1.3500 region against the dollar in the short term with a further test of 1.3450 realistic later this week.

The Euro-zone economic data was mixed with the Sentix business confidence index slightly stronger than expected for March while the increase in German industrial orders was slightly lower than expected and the overall market impact was limited.

During the day, risk appetite failed to sustain the initial optimism which hampered the Euro. The deterioration was triggered in part by comments from the Greek prime Minister that the fiscal crisis could spread to beyond Europe which reminded markets of the risks to several international sovereign ratings. These comments also revived specific fears over the Euro-zone economy and there were further credit-rating downgradings for Portugal’s main banks.

There were no major US economic data releases during the day with the dollar able to maintain, but not extend its current yield advantage over the Euro. Any comments from Fed officials will be monitored closely, but there are no major data releases over the next 48 hours with the retail sales data due on Friday.

The Euro dipped to lows close to 1.36 against the dollar during the US session before stabilising around 1.3625 and a lack of releases may sustain the period of consolidation. The Euro edged slightly weaker on Tuesday and there was another test of technical support close to the 1.36 level against the US currency.

Investica
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