Politics Stifles Euro Advance

The Euro has been slightly reined in this morning following several weeks of strengthening against both Sterling and the Dollar. There was no end in sight to Sterling’s weakening against the Euro last week after a combination of poor UK data and strong EU sentiment lead to the most substantial losses for GBP/EUR in over a year. However, this morning the Euro has weakened right across the board and it’s all thanks to politics.

Despite the number of positive data releases that have came out of the Eurozone over the last couple of weeks, there will have been few people who disagreed with German Finance Minister Wolfgang Schaeuble last Friday who commented that “the euro crisis is not over”. The first suggestions of this in the markets were seen this morning as borrowing costs rose across the region on the back of growing political uncertainty in Europe. Spanish Prime Minister Mariano Rajoy faces allegations of corruption, whilst Silvio Berlusconi has closed in on Italian front runner Pier Luigi Bersani.

This increased uncertainty within the Eurozone has seen Sterling strengthen against the Euro for the first time in weeks, hitting 1.1578 this morning, though the pair is still some way off the next key level of resistance at 1.1722. The Euro has also dropped off against the Dollar today, falling to 1.3560 at present and potentially targeting the next key level of support at 1.3487.

Please find a summary of this week’s economic calendar below:

Mariano Rajoy and Angela Merkel meeting
09:30 UK PMI Construction
09:30 EU Sentix Investor Confidence
10:00 EU Producer Price Index
15:00 US Factory Orders

00:30 Australian Trade Balance
01:45 Chinese HSBC Services PMI
03:30 Australian RBA Interest Rate Decision
08:53 German Markit Services PMI
08:58 EU Markit Services PMI
09:28 UK Markit Services PMI
10:00 EU Retail Sales
15:00 ISM Non-Manufacturing PMI

11:00 German Factory Orders
15:00 Canadian Ivey PMI

00:30 Australian Unemployment Rate
09:30 UK Goods Trade Balance
09:30 UK Industrial Production
09:30 UK Manufacturing Production
10:00 European Commission Growth Forecasts
11:00 German Industrial Production
12:00 UK Interest Rate Decision
12:45 ECB Interest Rate Decision
15:00 UK NIESR GDP Estimate

EU Council Meeting
01:00 Chinese Trade Balance
05:30 Chinese Consumer Price Index
05:30 Chinese Producer Price Index
07:00 German Trade Balance
13:30 US Trade Balance