EUR/USD (1.3190) With the eurozone financial ministers’ meeting to decide on the EUR8 billion package for the Greek bailout postponed to mid-November, the single currency has become a victim of political delay. Instead of being able to temporarily shelve concerns about the persistent Greek crisis and the impending peripheral risks involving Spain and Italy, traders now have to add it to an upcoming week that is packed with several other ‘event risks’ including the ECB interest rate meeting and the US jobless report. With the euro falling and the eurozone PMI threatening, at least if one compares the pattern that prevailed prior to the last recession, a similar outcome, the UK and Japan have joined the US and the BRICs in voicing their concerns about the pace and cost of European decision-making. Japan’s Finance Minister urged a more transparent eurozone policy and UK’s Cameron urged a proactive IMF role.
Bank of France’s Christian Noyer attempted to calm the markets by saying that he could imagine a more leveraged EFSF backed by increased guarantees to buy bonds and precautionary loans to at-risk members. Short term, however, this is unlikely to buoy the euro. It must learn to live with excessive risks and high volatility and may slide to 1.3060 or even 1.2700. A recovery attempt would meet abundant supply in the 1.3325/65 zone.
Market Bias Index
For the first time in three weeks, the EUR/USD bias has expanded to almost 5 percent. The perception of dollar over-valuation has also spread against the other main currencies.
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Deutsche Bank
Fixed Income Research – Global