By FX Empire.com
With the start of the new week on Monday the EUR/USD was under heavy pressure and fluctuated strongly with the high uncertainty in the euro area and clearly leaving the higher hand for the dollar.
Risk aversion was still dominant as some development in Greece was offset by growing instability in Italy. Greece reached to the consensus on the coalition government and Papandreou is to step down to make way for the new leadership to adopt the new bailout, yet investors await the final formation of the government and who will lead the next phase and worries remained evident as even with Greece moving closer to the bailout and avoiding default, they still will go into early elections that remain a source of agony.
Italy was also more downside pressure as Berlusconi loses more support from his own allies asking him to step down ahead of a critical vote in parliament on Tuesday on the amended 2010 budget. Some reports suggested that he will step down which markets rather seemingly accepted and tried to recovery yet soon after his office dismissed the rumors as unfounded.
On Tuesday the lack of major data will leave the focus on the Italian vote and the developments from the euro area finance ministers that might provide late Monday comments and updates. Tuesday will also see the EU finance ministers meeting to continue the discussions and they should continue the progress made by EU leaders and start to implement the means to expand the EFSF firepower which the market is still waiting on.
More volatility is expected and surely without a clear political breakthrough from Greece and Italy the tensed environment will prevail and only pressure the euro further south.
Germany will start the session at 07:00 GMT with the current account and trade balance figures for September, where the current account surplus is expected to improve to 12.3 billion euros from 7.0 billion euros.
In addition, the seasonally adjusted exports index could have dropped to 0.5% from 3.5%, while the seasonally adjusted imports index is expected to expand by 0.4% from the previous steady reading.
Furthermore, the trade surplus could have expanded to 12.5 billion euros from 11.8 billion euros.
Originally posted here
