News Column

Euro Weakens Against Majors

July 22, 2014

CANBERA (Alliance News) - The euro weakened against most major rivals in European deals on Tuesday, as investors await the outcome of a meeting between EU foreign ministers in Brussels today.

The meeting is to discuss further sanctions against Russia over its role in the Malaysian airplane crash in eastern Ukraine. While the US President Barack Obama has put pressure on Europe for a more forceful response, the Britain, France and Germany said the EU should be ready to ratchet up sanctions.

EU countries are likely to push for an expansion of "tier 2" sanctions against Russia, which will freeze assets and ban visas on individuals connected to the Putin regime and some entities.

Meanwhile, US Secretary of State John Kerry arrived in Cairo Monday night to work out a cease-fire in the 14-day-old conflict even as Israel kept up its assaults in the Gaza Strip.

The rising gap in monetary policies among the European Central Bank and rest of major central banks had already putting pressure on the single currency. While the ECB stands ready to loose policy further, the US Federal Reserve is expected to raise borrowing costs in 2015.

Traders focus on the US CPI for June, due shortly. Stronger-than-expected inflation reading may support the case for the Federal Reserve bringing forward the time line for increasing interest rates.

The euro depreciated to 1.3477 against the greenback, its weakest since February 3. At Monday's close, the pair was quoted at 1.3522. The next possible support for the euro is seen around the 1.34 mark.

Retreating from an early high of 0.7922 against the pound, the euro slipped to a 5-day low of 0.7896. If the euro slides further, 0.78 is seen as its next possible downside level.

UK budget deficit excluding financial interventions increased in June, data from the Office for National Statistics showed.

Public sector net borrowing excluding financial interventions totaled GBP 11.4 billion, which was GBP 3.8 billion than last June.

The euro declined to a 4-day low of 136.80 against the Japanese yen, after having advanced to a 5-day high of 137.33 in the early Asian session. On the downside, the euro may face support around the 136.00 zone.

Japan's government downgraded growth outlook for the fiscal year 2014, citing weak exports and subdued demand after the sales tax hike in April.

The Council on Economic and Fiscal Policy, the top advisory panel, said the real gross domestic product will grow 1.2% in the fiscal year ending March instead of 1.4% estimated in January.

The euro slipped to an 11-day low of 1.4477 against the loonie and a new 8-month low of 1.4349 against the aussie, off an early high of 1.4531 and a 4-day high of 1.4445, respectively. The euro is likely to find support around 1.425 against the aussie and 1.44 against the loonie.

The euro retreated to 1.5541 against the kiwi from an early 4-day high of 1.5591. Further weakness may take the euro to a support around the 1.54 zone.

Meanwhile, the euro held steady against the franc, after firming to 1.2153 during early European deals. The pair was worth 1.2143 when it ended deals yesterday.

Switzerland's trade surplus declined more-than-expected in June as imports rose faster than exports, data from the Swiss Federal Customs Administration showed.

The trade surplus was at CHF 1.38 billion in June, which was less than the CHF 2.78 billion expected by economists. In May, the country registered a surplus of CHF 2.85 billion.

Looking ahead, US consumer price inflation report for June, house price index for May and existing home sales for June are due to be released in the New York session.

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Source: Alliance News

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