Euro was little changed against the dollar in the European session though downside pressure remains. Markets are focused on Europe post-elections. The new French President Francois Hollande will be meeting with German Chancellor Angela Merkel to discuss the European fiscal union and there are concerns that his views may differ from Sarkozy, who was more in agreement with Merkel on this treaty .
However, the real focus is on Greece which is at risk of default after Sunday’s elections failed to result in the formation of a new government. On Monday the New Democracy party failed to form a coalition, so the mandate has been passed to the Syriza party, which placed second in the elections. If a government isn’t formed soon there could be new elections again. This political uncertainty is putting the EU-IMF bailout plan at risk.
Euro was able to hold above the key $1.30 level throughout the European session. EURUSD opened in Europe at 1.3034 and swung from a low of 1.3000 to 1.3036, supported by better than expected German industrial output data.
GBPUSD was unable to hold onto Monday’s gains and dropped to 1.6123, weighed down by weak UK housing data. The RICS UK house-price index fell to -19 in April from a downwardly revised -11 in March. Against the euro, sterling was little changed, last trading at 80.65 pence.
USDJPY remains on the down side, dropping to a low of 79.70 after opening in Europe at 79.97. There is not much on the economic calendar in the US session to influence the dollar directly, so focus remains on macroeconomic and political issues in Europe. EURJPY remains under pressure, trading between 103.91 and 103.72.