As investors are growing wary about the ongoing disagreements on how to tackle the Greek debt crisis, they are beginning to lose faith in the Euro, causing it to plummet against the greenback today.
Meanwhile, Spanish regional elections scheduled for this weekend, on May 22nd added to concerns, as Spain is also going through its own debt issues. There is speculation that Spain’s socialist government may lose the elections to the centre-right opposition Popular Party, which could unearth any further unknown financial problems.
In the past few days, Euro barely got off its seven-week lows, aided by a weaker US dollar.
Sovereign selling added to the Single Currencies losses, as central banks cut back on long positions ahead of the weekend. Spreads between German bund yields and bond yields from the peripheral Eurozone countries widened even more.
“There are a number of headwinds ahead that favour playing the euro from the short side,” said Jeremy Stretch, currency strategist at CIBC. “The positioning and/or valuation stories argue in favour of correction risks (for the euro) going into the summer”, he added.
EURUSD hit a high of 1.4939 on May 4th and has since shed almost 5 percent. Today after hitting a European session high of 1.4344, the pair plummeted 207 pips down to 1.4138.
EURJPY dropped from an earlier session high of 117.15 extending losses into the US session down to 115.51 at 10am CET.