Euro Rallies after Eurozone Political Drama

By TraderVox.com

Tradervox (Dublin) – The euro has come back from a tumble it experienced on Monday after Sunday’s election results in Greece and France. There has been a general bounce of risk correlated assets but some analysts are claiming that this is nothing more than minor consolidation prior to the next wave of risk liquidation. The euro has managed to close above 1.3000 on Monday, but any additional rallies is expected to be capped at 1.3200. Market analysts are have warned that the market is digesting Sunday’s election results and traders are looking to see whether the newly elected governments will adhere to the austerity measures imposed on the region to ease debt crisis.

Eurozone is under a lot of uncertainty with Greece situation being the first on the list as political leaders meet to form government. It is expected that austerity measures might be significantly reduced as the government tries to quell the opposition. In France, Francois Hollande has vowed to fight austerity measures; in addition, Spain has hit the headlines again as it tries to rescue the third largest bank in the country. These situations in the region are set to affect investor confidence in the regions ability to fight debt crisis. Moreover, the softer global economic data that is being released indicates the fragility of the global economy hence risk correlated equities’ rallies will be limited and there might be a bearish outlook.

The euro dropped 0.1 percent to trade at $1.3033 from $1.3051 yesterday, it had touched its lowest at $1.2955, which the lowest it has been since January 25. The 17-nation currency traded at 104.21 yen from 104.28 it closed yesterday. Japanese currency dropped against the dollar by 0.1 percent to trade at 79.96 per dollar. In south pacific nations, the Australian dollar declined by 0.1 percent to $1.0190.

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