Forex Market Update: Cyprus Bailout Crisis, German Economic Data Put Pressure on Euro
Mounting concerns over Cypriot bailout crisis and lackluster business outlook from Germany put pressure on the euro. On Friday, the euro slumped to its two-week low against the yen and also lost its ground against the greenback.
On Thursday, the European Central Bank warned the island nation to reach a deal with the euro zone leaders within next 4 days, adding that lack of resolution over the proposal would result in cancellation of financial aid package. Earlier today, Cyprus’s talks with Moscow also failed, ending speculation that Russia could provide lifeline to its teetering financial system. In case, Cyprus fails to reach an agreement with the euro zone leaders by Monday then Cyprus risks financial system meltdown and ouster from euro zone.
Amid uncertainty, investors preferred safety in safe-haven assets such as German bonds, gold and other stable and liquid currencies like yen, weighing on euro.
The euro was also undermined on Friday after a data release showed that German business confidence (ifo index) fell for the first time in last five months in March.
The euro sagged to a two-week low against yen to trade at 121.44 yen after Germany’s Ifo data was released and against the dollar it fell below $1.2900, very near its intra-day low of $1.2888, hit during Asian trading hours before recovering to $1.2915 at last check.
“The euro remains a sell on rallies to us. Even if there is a deal on Cyprus, the economic data coming out of the euro zone suggests more monetary policy easing. And if there is no deal on Cyprus, it will prove pretty hard for risk assets,” said Paul Robson, senior currency strategist, at RBS, according to Reuters.
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Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.
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