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EUR/USD Sinks on Political Turmoil in Greece & Italy

November 9, 2011 by

EUR/USD slumped today as Greece struggles to form a new (temporary) government for the third day, while Italy will likely also lose leadership and nobody can guarantee that the nation will avoid problems with forming a new government. The fundamental reports were largely positive for the dollar, driving the currency pair further down. Tomorrow some important reports are expected, among them trade balance and jobless claims. Tomorrow’s data is expected to be negative, but not too bad.

Wholesale inventories decrease 0.1 percent in September after increasing by the same rate in the month before. Median forecast was 0.5 percent. (Event A on the chart.)

US crude oil inventories decreased by 1.4 million barrels from the previous week and are in the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.1 million barrels last week and are in the middle limit of the average range. (Event B on the chart.)

On Monday, a report on consumer credit was released, showing an increase by $7.4 billion in September, showing an improvement after the decline by $9.7 billion in August. Forecasters estimated an increase of $5.1 billion before the report. (Not shown on the chart.)

EUR/USD for 2011-11-09

If you have any comments on the recent EUR/USD action, please reply using the form below.

3 Responses to “EUR/USD Sinks on Political Turmoil in Greece & Italy”

  1. Javy

    I believe that the tension is shifting, now that Greece has a new PM, the attention will focus on Italy as the most likely catalyst to a major crisis. For some time (during the Greek week) no one really paid attention to Italy until the cost of borrowing rose to record levels on Wednesday. However, the disaster will come if all creditors to Italy want to do the same. To me, the trigger to a major new crisis is not Grece, but Italy as there is not enough money left in the bailout fund, and the market will probably panic if things do not improve quickly!!

    Reply

    admin Reply:

    A lot of traders seem to be worried about Italy. I wonder what happens if tomorrow Spain’s bond yield rises to 15-20%.

    Reply

  2. devo

    One of the major concerns with Itally is the zero population growth, whereas a main difference within the USA, new taxpayers are being provided to fund the ever present “Kick the Can” mentality of Washington policy makers. I’d watch for more than just Spain bond yields to rise in the upcomming months.

    Reply

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