The EUR/USD was pressured heavily to the downside on Wednesday amid a broad wave of risk aversion on the worsening crisis in the euro area and political uncertainty in Italy and Greece.
Investors are jittery and skeptic and the components are spilling into a toxic equation. The market is already spooked about a political vacuum in Italy and that the nation which is seen better off at first from market sight without Berlusconi is still doubted to channel the reform needed to avert a meltdown.
The main trigger on Wednesday was LCH Clearnet SA decision to raise the margin requirements on trading Italian government bonds, which with the fear in the market drove the bonds strongly lower and took the yields above the risky and alarming 7.0% limit!
Berlusconi and Papandreou are seen gone, yet who is coming and can they handle the tough task is what markets are worried about, and stalling in such critical decisions are this time is not what the market needs and that is keeping the downside pressure on the euro for now.
Investors now await the decision from Greece which they said might be coming on Wednesday yet so far the news are not coming our way and we expect the decision to be released later in the day and to affect the market on Thursday which might be a source of slight relief for the euro after the heavy losses seen.
The focus will remain on the developments in the euro area debt-laden nations, and especially Greece and Italy, giving little focus on the fundamentals queued from Germany and the United States.
Germany will start the day with the consumer price index in a final reading for October at 07:00 GMT, where the monthly CPI is expected unrevised at 0.0%, while the annual index is also expected unrevised at 2.5%.
In addition, the CPI – EU harmonized monthly index is also expected unrevised at 0.0%, while the annual index is projected to linger at 2.8%.
Germany will also release the wholesale price index for October, where the previous monthly and annual indexes were 0.3% and 5.7% respectively.
At 09:00 GMT the euro zone will join the session with the European Central Bank’s monthly report.
The United States will join the session at 13:30 GMT with the import price index for October, where the monthly index is expected to expand by 0.2% from 0.3%, while the previous annual reading was 13.4%.
The Untied States will also release the trade balance figures for September, with expectations that the trade deficit could have widened to $46.2 billion from $45.6 billion.
The United States will also provide the initial jobless claims figure (November 5), with expectations that the number of claims could have increased to 400 thousands from 397 thousands.
At 19:00 GMT the United States will join again with the monthly budget statement for October, where the budget deficit could have narrowed to $110.7 billion from $140.4 billion.
Originally posted here
