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EUR in tight range amidst Greece worries
Deadlock in Greece after Sunday’s elections raised concerns about further turbulence to come for the debt-burdened country. Market continues to remain skeptic after the leaders of New Democracy party were unable to reach consensus to form a government. New Democracy and Pasok had agreed on the latest terms for country’s second bailout package. Radical Left or Syriza, the party that received the second-most votes in Sunday’s election and the party which has vowed to renegotiate the latest conditions of 130 billion euro bailout package, is now set at forming a government on Tuesday. President of European Parliament has already warned that the austerity agreements must be "respected" and there is no room to renegotiate.
Financial markets will keep a close watch on the latest political developments coming out of Greece. Should there be no government formed aft the negations, president would appoint an interim government and call fresh polls in 30 days, which leads to instability. Now there are talks that Greece may exit Euro-zone may be as early as this summer.
Traders are worried of this political uncertainty which seems to overweigh on markets and boosting demand for safe havens - Treasury and dollar.
The US Treasury Department on Tuesday sold $32 billion in 3-year notes at a yield of 0.362%, the lowest level since February. Recent U.S. economic reports have come in soft, including a disappointing jobs report on Friday showing the labor market grew more slowly in April, also makes Treasury bonds more attractive.
The dollar index yesterday rose to 79.96 before settling at 79.74. It’s the seventh straight gain for the dollar index.
Yesterday EUR closed below the psychological level of 1.30. In today's trade EUR dipped to its lowest levels since January 2012 at $1.2965. EUR will continue to remain under pressure amid uncertain Greek political situation.
UBS AG: Investors should sell the euro at $1.3075, targeting $1.2850 with a stop-loss order at $1.3165 (source: Bloomberg)
There is no important data scheduled today from the US and not much from Europe as well. However Fed Chairman Mr. Bernanke is will speak on Bank capital on Thursday and in the backdrop of recent weak jobs number, his comments would be closely watched for any hints of a possible monetary easing.
Haresh Menghani, Market Analyst
Admiral Markets
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