The currency blog

The euro has again moved lower against the majors and in particular against the USD moving down to 1.4523 overnight and overall down 500 points from recent highs. The cause of the downturn has been attributed to the recent jitters in Greece and more recently in Austria. The Greek prime minister commented yesterday that Greece does not have much time and must take tough decisions within the next three months- decisions that have been left for decades.  In a very direct address he stated that “we must change or sink” and vowed that he will tax the bonuses of Greek bankers by 90%- move over Alistair Darling!

Reports on the web also suggested that a second bank in Austria may require a government rescue- this follows yesterdays’ nationalization of an Austrian bank yesterday. The euro has suddenly in the space of week turned from an alternative buy from the USD to a prospective risk. Going forward there are other economies in the eurozone that could create pressure and further banking issues such as the Balkan nations, Spain, Italy & Ireland.

On the back of the euro weakness the pound has managed to claw back over 1.11 in more a case of euro weakness over pound strength. In addition looking at the euro from a technical perspective it has looked overvalued and recently we hit a double top at 1.5140 against the USD- the next major support level is at 1.4480.

Data from the UK economy showed that CPI came in a tad higher than expected at 1.9%- this is inline with an expected increase in inflation and is not significant to concern the Bank of England. Later today we have more economic feedback from the US with PPI and Industrial Production- if we see more good news then the data will back up recent positives in non farm payrolls and retail sales and lead to more USD strength.

Discuss on this on the Currency Exchange Forum