EURO Wallowing In No-Mans Land

The EUR received only temporary support from a surprise uptick in Spanish manufacturing data early Friday. The 17-member currency hastily lost it all when other Euro-zone activity headlines began to disappoint. For now, the dollar is back in demand despite the US sequester cloud that kicks in with automatic spending cuts today.

The overall tone in Europe’s financial markets remains subdued ever since it was announced that Euro-zone banks would sharply scale back their early repayment of funds from the ECB’s three-year lending operations next week. In total +EUR12.5b is to be repaid, a sharp drop from last week’s +EUR62.8b. Negative news flow continues to have an impact on Euro regional funding markets.

Italy’s inconclusive election result probably means another vote later this year is most likely. Investors are now worried that the Italian political situation could undermine further euro-zone economic growth and financial market confidence. Spain will get to test investor appetite for its government bonds early next week, becoming the latest of the weaker peripheries to seek investor funding. Italy’s debt auctions came with good demand but at the expense of higher yields.

Dovish Draghi rhetoric is shaping the EUR ahead of next week’s ECB interest rate meeting. However, Do not be surprised to see the ECB using further communication to allow euro money markets to adjust.



* EUR Euro-Zone Producer Price Index
* AUD Reserve Bank of Australia Rate Decision
* EUR Euro-Zone Retail Sales
* AUD Gross Domestic Product
* EUR Euro-Zone Gross Domestic Product s.a.
* CAD Bank of Canada Rate Decision
* JPY Bank of Japan Rate Decision
* GBP Bank of England Rate Decision
* GBP BOE Asset Purchase Target
* EUR European Central Bank Rate Decision
* JPY Gross Domestic Product
* USD Change in Non-farm Payrolls
* CAD Unemployment Rate
* USD Unemployment Rate

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell