Euro Under Pressure Ahead Of EU Summit
28 June 2012 - 8:46PM
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The euro was under pressure ahead of the closely watched EU
summit, which begins later in the day.
The common currency fell sharply in the European session as the
number of unemployed people in Germany rose by more than expected
and Spanish 10-year bond yields climbed to an unsustainable level
of 7 percent.
Traders keep their eyes on the EU Summit, where a number of
issues ranging from debt reorganization to banking union as well as
a potential renegotiation of Greece's bailout terms are expected to
be discussed.
No quantum leap is expected immediately and the market is
already adopted a cautious mindset that the eurozone crisis
continues to remain a stumbling block in the recovery process.
French President Francois Hollande and German Chancellor Angela
Merkel said at a meeting in Paris on Wednesday that they must find
ways to deepen the integration of Europe.
However, the solution still seems a distant dream owing to the
fact that no credible resolutions emerged even after the EU leaders
met around 20 times in the past 2-years after the Greece crisis
sprouted.
Today's disappointing German unemployment data added pressure on
the already struggling euro. Although the think-tank Ifo projected
a faster-than expected 0.7 percent growth for the German economy in
2012, it observed that the increased uncertainty in Eurozone
continued to dampen German economic momentum.
The common currency moved closer to the psychologically
important mark of 1.24 against the dollar for the first time in
more than 3-weeks. The next key level to watch on the downside is
1.23.
Against the yen, the euro retraced from its resistance level
above the 101.60 to a more than 3-week low of 98.35. The near-term
support for the euro-yen pair is seen around the 98.0 level.
Japan's retail sales rose 3.6 percent year-over-year in May,
faster than the 3 percent increase forecast by economists, data
from the Ministry of Economy, Trade and Industry showed.
While retail sales have now increased for six straight months,
the report showed that sales growth in May eased to a three-month
low, suggesting slow growth in private consumption amid
intensifying eurozone woes.
The single currency erased its Asian session gains against the
pound, falling from a 2-day high of 0.8032 to as low as yesterday's
bottom at 0.7988. Against the franc, the euro traded in its recent
ranges between 1.2015 and 1.2012.
The U.K. economy entered a double-dip recession in the first
quarter as previously estimated, final data from the Office for
National Statistics revealed today.
Gross domestic product fell 0.3 percent quarter-on-quarter, in
line with the estimate released on May 24. But the decline for the
fourth quarter of 2011 was revised to 0.4 percent from 0.3
percent.
Two straight quarters of contraction signals a recession. Also,
the economy entered a double-dip recession for the first time since
1970s.
Looking ahead, the U.S. first quarter final GDP data and the
weekly jobless claims for the week ended June 23 are due in the New
York morning session.
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