Forex Asia Review – Euro drops on uncertainty of French elections

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EURUSD opened the Asian session with a gap lower at 1.3183 versus Friday’s two-week high of 1.3225. A pledge by the International Monetary Fund to boost its firepower by more than $400 billion to fight the European debt crisis only briefly lifted the euro last week. Elections in France over the weekend caused uncertainty in the markets after President Nicolas Sarkozy was defeated by his challenger Francois Hollande in the first round of elections. Markets are unsure of the implications of a win by Hollande, who may be less keen than Sarkozy on a German-led drive for austerity measures. The focus turns to the elections on May 6.

 

GBPUSD paused after a strong rally on Friday that led the pair to a near six-month high of 1.6147 after being boosted by unexpectedly strong UK retail sales figures.  The pair traded a range in the Asian session between 1.6105 and 1.6131. EURGBP traded near a twenty-month low of 0.8169.

 

Yen gained some ground in a more risk-off market environment. USDJPY opened in Asia at 81.50 and touched lows of 81.24. However, this rebound is expected to be brief as the yen is expected to come under pressure again ahead of the Bank of Japan policy meeting on Friday, when the central bank is expected to ease policy.

 

EURJPY tracked the USDJPY lower and fell to a low of 107.12 from an early session high of  107.78.

 

AUDUSD dropped almost 60 pips to 1.0325, weighed down by softer than expected producer price (PPI) numbers which raised expectations for a rate cut by the Reserve Bank of Australia at the May 1 meeting.  China PMI helped support the aussie from a further drop. The Chinese data came in higher than previous. Showing factory activity stabilized in April. China is Australia’s major trading partner.