Euro was lower against the dollar today, erasing all gains made in Friday’s rally. Weak euro-zone economic data and political uncertainty in France and as well as the Netherlands created market jitters over the euro zone sovereign-debt crisis. The preliminary PMI (purchasing managers index) for the euro zone fell to 47.4 in April from 49.1 in March, and also fell for Germany and France, the two largest euro zone economies.
If the French elections result in a change of government, there is uncertainty whether the next government will be less keen on austerity measures. The Dutch government collapsed today after a breakdown in austerity talks.
The negative news flow from Europe offset the positive news from last Friday that the IMF increased its lending capacity by over $400 billion in order to safeguard against the euro zone crisis. Damp risk sentiment pushed EURUSD to a low of 1.3103 in early US trading hours, before a slight recovery to 1.3147.
GBPUSD dipped to 1.6076 but bounced in New York trading close to a five-month high. Sterling is buoyed by strong UK retail sales numbers released on Friday which showed the biggest jump in over a year in March, fuelling hopes that the UK economic recovery is gaining momentum and dampening expectations for another round of quantitative easing from the Bank of England.
EURGBP fell to a twenty-month low of 0.8147, the lowest since 22 August 2010.
The Japanese yen benefitted from safe haven demand and rose against the euro. EURJPY fell by over 1 percent in Europeans trading and consolidated during the US session, touching lows of 106.30.
USDJPY fell early in Europe to 80.96 around which the pair hovered in North American trading hours. However, there is caution by investors to let yen strengthen too much due to speculation that the Bank of Japan is largely expected to take additional steps to ease policy further at its meeting on Friday. This would usually weaken the yen.
Crude oil traded lower in New York compared to Friday, remaining below $103. Sluggish flash PMI manufacturing data from China earlier today caused a selloff on fears of lower oil demand form the world’s second largest economy.
Gold traded lower today touching a two-week low of $1,622 due to a broadly stronger US dollar. The ICE dollar index which measures the greenback against a basket of currencies rose to 79.626 versus 79.140 in late North American trading on Friday. Gold priced in USD usually has an inverse relationship with dollar.