As a new week begins, the euro declined sharply against the U.S. dollar, due to rising concerns and dominant jitters in Europe, where the pair is biased to the downside, especially after the Greek Prime Minister announced that he will step down and hand his powers to the coalition government, while France is to apply further austerity measures to save the nation from the debt crisis, in the time lights are focused on Italy with a vote from the Parliament on the budget expected tomorrow.
Europe remains the main focus in the market, where we can see world leaders and after the two-day meeting on November 3 and 4 were unable to quell jitters and rising fears in Europe, where all eyes were concentrated on them to solve the debt crisis and force European governments to move and tackle the debt crisis by implementing the final plan; however, as usual leaders disappoint investors and trigger more pessimism to the market.
The euro ended a strongly bearish week and extended the losses as this week started, where all eyes are focused on the finance ministers' meeting in Brussels today, awaiting more steps from lawmakers to implement the final plan approved on October 26, especially after the Greek Prime Minister, George Papandreou stepped back and canceled his decision of holding a general referendum on the second bailout deal, and announced that he will step down and hand his powers to the coalition government.
The economic conditions are still highly uncertain in Europe especially when the political conflict moved to Italy and France, where the Italian Prime Minister, Berlusconi has lost his majority and we can see that several lawmakers are demanding him to step down in the time the parliament is expected to vote on the budget plan tomorrow, noting the Italy could be the next victim of the debt crisis in Europe, where the country handles the largest debt in the euro-area region and a political conflict could hinder the application of further austerity, and in result Italy could fall in the debt-trap while European leaders are acting very slowly.
The euro started the session today very weak and is expected to remain fragile until European leaders recognize that the danger zone is expanding and larger economies within the euro-area are on the verge, where solving Greece's issues could save other nations; however, they should act firmly and directly to curb the contagion of the crisis and revive recovery as soon as possible.
In addition, the downbeat retail sales index from the euro zone added more jitters and fears to the market, where the retail sales index dropped by 0.7% from the previous drop of 0.3% in September.
The EUR/USD pair opened this week at 1.3824, and recorded the highest at 1.3829 and the lowest at 1.3696, and is currently hovering around 1.3683, extending the huge losses incurred in the past week.
Over weekly basis, the EUR/USD pair opened the previous week at 1.4150 and recorded the highest at 1.4169, and then reversed sharply to the downside on the news that Greece will hold a general referendum on the aid deal, reaching a low of 1.3607.
The U.S. dollar index (USDIX), gained big time on the political conflict in Greece and ended a strongly bullish wave, supported by pessimism and rising fears, where investors held more of the low yielding currency to avert risk, especially when the general referendum threatened the euro zone as a whole; however, the greenback advanced more today as the situation in Europe became more complicated and leaders should act quickly to control the pessimism and prevent the contagion from destroying the one currency union.
The U.S. dollar started this week at 76.74, and set the highest at 77.32 and the lowest at 76.73, and trades now around 77.22.
Over weekly basis, the index opened the past week at 75.00 and reached a high of 77.67 and a low of 74.97, and closed the session in New York on Friday at 76.91, after the worse than expected jobs report forced the dollar to give up some of the huge weekly gains.
Moreover, the Swiss franc lost strength against the U.S. dollar today after the consumer price index figures showed that Switzerland's deflation threats rose while unemployment inclined to 2.9% from 2.8%.
The USD/CHF pair started the day at 0.8870, and reached a high of 0.9030 and after setting a low of 0.8867, and is trading now around 0.9014, extending the gains recorded in the past week.