The center of attention remains the European continent and the rising public finances deterioration. The singe 16-nation currency was not beaten with one strike today, yet TWO blows to the head sending it tumbling versus its major counterparts.
The focus in Europe today is on the budget, on prudent fiscal reform, and on the strangled outlook for growth on the back of enlarged debt burdens and budget shortfalls.
Starting off with the center of attention, the euro area, the first hit was with news from France which seemingly has changed its allegiance from respect to the area's unity and functionality, the side Trichet and Junker call for, to side with Germany's Merkel on potential for the IMF to burden the aid for Greece expected to be finalized with an answer in the two-day summit to start tomorrow.
The news send the euro lower offsetting the good fundamentals from the area, where the PMI manufacturing and services continued to expand further in March, while Germany's business confidence has risen further.
For the second blow today, it was handed gracefully from Fitch Ratings, which in a statement from London today announced downgrading the credit rating for Portugal by another step to AA- and help to their negative outlook on the nation implying more such moves to come!
On the back of the bearish news and the fear over the outlook for the recovery for the euro area, the euro extended the downside move hitting fresh new lows in the session. The euro slumped versus the dollar to hit the low of 1.3341 lingering at its lowest in 10 months down already around 1.0% after opening at 1.3492. The pair is poised to continue the southern move and as far as stability is seen below 1.3485 the short term move is to extend further.
The euro also lost grounds versus its royal counterpart, hitting a fresh new low at 0.8908 and a fresh record low versus Swissy of 1.4230 igniting fears of a new round of Franc selling by the SNB and intervention to halt the excessive gains for the Franc versus the euro.
Concerns, fears and jitters all dominate the market now and to the benefit of the dollar, which is seemingly not withstanding the pressure as only a haven, but the federal economy is providing its strong merits in comparison to its major counterparts! The dollar advanced further today extending yesterday's gains, where the index that gauges greenback's movement versus its major 6 counterparts hit the high of 82.62 and currently lingering around the highs so far at 81.50 areas rising over early lows at opening around 80.83.
Sterling on the other hand was not expressing the joys of the recovery either, trading with volatility and sinking versus the dollar ahead of the Budget Report which is likely to place the United Kingdom in no better territories than those of its peer Europeans! Darling is expected to shun the election tension and provide a more balanced 2010 budget as they continue to spend to support the weak economy while the balance is to be provided by optimistic expectations for receipts for the HM Treasury! That is so far feared to fail in convincing the market with its worthiness or even Conservatives as prudent fiscal planning is needed to be implemented as the budget shortfall flirts with that of Greece, the highest in the area!
GBPUSD is currently trading bearishly around 1.4946 slightly off lows set so far at 1.4933 down from opening areas around 1.5043. The pair is poised for further bearish movement shall it managed to extend the decline towards the low set and stabilize below 1.4930 which we see that the budget report is likely to support, unless it was positively absorbed by the market, though amid heightened debt burden woes the negativity is more likely.
As for the Japanese yen, the sentiment is rather mixed around the Japanese yen, where former officials from Japan said the government should not intervene in the market, pointing to the tabled option against the continued appreciation. Yet on the other hand, rising exports reported today managed to revive hopes for the recovery to continue and send stocks rising which was against the yen helping its weakness. Still we remain cautious around the pair which is currently benefiting from the dollar strength as the USDJPY is currently trading around its highs around 91.39 and lingers strongly bullish for the rest of the day.