At the beginning of a new week, currencies are fluctuating heavily amid the mixed sentiment and the flow of heavy fundamentals from major economies, awaiting more critical data during the week, including rate decisions from Europe and Australia and jobs report from the world's largest economy. In addition, the euro-area finance minister gathered today to discuss the enhancement of the European rescue funds (European Financial Stability Facility) and the risk associated with a Greek default.
The U.S. dollar provided a bullish opening gap as this week started, reflecting bearish opening gap seen on the euro and sterling pound, where markets are volatile amid the mixed sentiment and renewed fear of a Greek default especially after the Greek government announced new austerity measures to reduce the budget deficit by 6.6 billion euros in order to reach 6.8% of the total GDP, while international lenders target is at 6.5%.
Greece could miss the next tranche of 2010's bailout package due in October and could also lose the second bailout package in case the nation was unable to reach the targets set by international lenders (International Monetary Fund, the European Union and the European Central Bank). Furthermore, international lenders sent inspectors to Greece for the second time to determine whether Greece is committed to the austerity measures and is eligible to receive the next installment in light of the new measures taken.
The question here is that will Papandreou be able to pass these more difficult measures through the Greek parliament again, especially after the general strikes and the strong opposition of spending cuts and rising taxes.
Moreover, the Europe region unveiled manufacturing data for September today, reflecting mixed manufacturing sectors among different countries, where the German and euro-area manufacturing sectors contracted less than expected, while the United kingdom manufacturing sector rebounded from contraction in August into expansion achieved in September, and finally Switzerland was the worst with further contraction.
The common currency appreciated on the news and covered the bearish opening gap seen against the U.S. dollar, yet the currency eased to currently trade around 1.3354. The EUR/USD pair also recorded a high of 1.3380 and a low of 1.3313, after opening the session at 1.3342, compared with Friday's closing in New York session at 1.3391.
Despite the upbeat manufacturing data from the United Kingdom and covering the bearish opening gap and the weakening dollar, the sterling pound returned to trade lower than the opening level today, affected by the strengthening euro.
The GBP/USD pair declined after the bearish opening gap seen today, where the pair opened the session at 1.5546 and closed New York session on Friday at 1.5587, to record a low of 1.5483. The pair was very volatile and set the highest at 1.5583 and is currently hovering around 1.5517.
The EUR/GBP pair advanced after opening the session at 0.8578, and reached a high of 0.8632, yet the pair is fluctuating heavily after reaching a low of 0.8563 and trades now around 0.8599.
Concerning the U.S. dollar index (USDIX), the index provided a bullish opening gap at 78.97, compared with Friday's closing in New York session at 78.71, and then retreated after reaching the highest at 79.14 to record the lowest at 78.78, noting that the index is currently trading at 78.94.
In general, we expect currencies to fluctuate heavily during this week and volatility could be dominant awaiting critical decision from the European Central Bank, the Bank of England and the Reserve Bank of Australia during this week, while today euro-area finance ministers' decisions and acts are expected to impact markets heavily as Europe remains the main focus, precisely Greece.