FX market outlook

FX market outlook

Posted on Wednesday, February 8 2017 at 9:04 am GMT+0000

Euro under pressure on concerns of French election, Greek debt.


There is a cautious mood in the markets as focus has turned to political risks in Europe and the United States. With little major economic data after the strong US payrolls data, attention is now on the looming election in France. Meanwhile, the Greek debt crisis is back in the picture.

The euro has been sliding since early this month due to political wrangling in France, where presidential candidates have been plagued by scandals. Additionally, there are concerns that the far-right, anti-EU candidate Marine Le Pen could win the vote.

Investors’ confidence has also been sapped by worries over Greece’s bailout. Focus will be on the Eurogroup meeting on February 20.

The euro has been under pressure and has lost 1.1 percent so far this week. It last stood at $1.0643 in late Asian session trading today. French and German 10-year yield spreads have widened the most since late 2012.

In other news, the Bank of Japan offered to buy bonds today for the third time in a week. Despite the action, the yen remained steady due to risk aversion in the markets. The dollar remains above the key 112-yen level today and was last at 112.30. Markets will turn to a meeting between US President Donald Trump and Japanese Prime Minister Shinzo Abe on Friday.

WTI oil is down for a third day to touch as low as $51.20 a barrel in Asian trading. Oil’s recent gains have been capped by supply risks as US inventory data yesterday showed an increase. More inventory data are due later today.

Gold is little changed since rising to a near 3-month high of $1235.64 on February 7.

Looking ahead to the rest of the day, the economic calendar is relatively light, with just Canadian housing starts data and US crude oil inventories to focus on.