The EUR fell to session lows against the dollar on Monday as an escalating political crisis in Spain pushed the country’s borrowing costs higher, curbing investor demand for the single currency. EUR/USD hit 1.3592 during European morning trade, the session low; the pair subsequently consolidated at 1.3597, shedding 0.31%. The pair was likely to find support at 1.3481, the low of January 30 and resistance at 1.3658, the session high. Spanish Prime Minister Mariano Rajoy faced calls to resign from the country’s opposition leader, following allegations that he and senior officials in the ruling Popular Party received secret payments. Prime Minister Rajoy strongly denied the corruption allegations in a statement on Saturday. The yield on Spanish 10-year bonds rose to 5.34% on Monday from 5.21% on Friday, as investor concerns over the deepening political crisis mounted. Elsewhere, official data showed that the number of unemployed people in Spain rose by 132,100 in January, below expectations for a 150,000 increase. Sentiment on the single currency was also hit after French Finance Minister Pierre Moscovici warned that the euro was possibly too strong following its recent rally. The euro hit 14-month highs against the dollar on Friday after data showed that manufacturing activity in the euro zone improved in January, while inflation and unemployment stabilized, underlining the view that the crisis in the region has turned a corner. The euro extended losses against the pound and the yen, with EUR/GBP falling 0.44% to 0.8652 and EUR/JPY down 0.20% to 126.31. Prime Minister Rajoy was due to hold talks with German Chancellor Angela Merkel in Berlin later Monday to discuss ways to spur growth in the euro zone. The talks were to be followed by a joint press conference.
EasyForexNews Research Team