Forex News Review – Euro tumbles as Greece fails to form government

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The euro tumbled  to a new four-month low against the dollar in the U.S. trading session after news that Greek political parties failed to reach agreement to form a coalition government, leading to new elections to be scheduled soon. This raises concern that the new government may be anti-austerity measures and putting at risk the EU/IMF bailout terms. Sentiment was dampened by more political uncertainty and EURUSD plunged to 1.2721, down 0.8 percent on the day. This the lowest level since January 17.

Euro fell against other major counterparts too. EURGBP touched a low of 0.7951, the lowest since November 2008.

EURJPY fell to a three-month low of 102.06.

Sterling fell below the key psychological support level of $1.60 for the first time in a month, and a break below that level accelerated a decline to 1.5987 in late New York trading.

The broadly stronger dollar rose against the yen after being bolstered by some positive U.S. economic data that gave optimism to the recovery. U.S. home builder sentiment improved in May to its highest in five years, signalling stabilization in the housing market that has been sluggish. Also the Empire State manufacturing index rose by more than expected.  USDJPY rose to 80.32, up 0.6 percent on the day.

The greenback rose above parity against the Canadian dollar, with USDCAD reaching a high of  1.0072, the highest since January 25. Adding to the Canadian dollar weakness is falling crude oil prices. Crude oil is a major Canadian export and prices fell to US$93.05 in New York trading, down from an earlier high of US$95.45.