The Euro is foreseen to lose additional ground opposite the US dollar today on increasing signs of deteriorating economic conditions in the bloc. Meanwhile, Greece is also garnering market attention as the debt-strapped nation braces itself for a 48-hour strike against a proposed new wave of austerity. Adding to the cautious market mood is the US Presidential election and its implications for the US economy.
Yesterday, the Spanish government reported that the number of jobseekers in recession-struck Spain soared to the highest level in at least 16 years in October. The ranks of the unemployed reached 4.83 Million last month as another 128,242 individuals were added to the jobless queue. All in all, unemployment rose by a considerable 2.7 percent from September. Such figures offer another ominous sign of a deep recession, and analysts say that the austerity program aimed at saving 150 Billion Euros from 2012 to 2014 is likely to delay any exit from the downturn. Today, Markit is due to release the Spanish Services PMI, and considering the dire economic conditions in the country, another contraction is expected for the sector. In October, the index dropped from 44.0 points to 40.2 points, a figure along similar levels is expected this month as recession continues to hamper growth prospects.
The Italian Services PMI is also awaited today, and a contraction for the seventeenth consecutive month in November is estimated for the sector. The index came in at 44.5 points in October after registering a 44.0-grade in the previous month, still below the 50 mark which separates expansion from contraction. Another bleak figure is seen to depict the continuing toll of the debt crisis on the bloc’s third largest economy. Even powerhouse Germany is feeling the pinch as German factory orders are believed to have dropped for a second consecutive month in September. New purchase orders placed with manufacturers are estimates to have waned by 0.3 percent during the month following the 1.3 percent plunge in August. Economic downturns in neighboring countries as well as the slowing global economic backdrop are likely to have debilitated demand, boding adversely for the German manufacturing sector. Amid such grim figures within the currency bloc, the Euro is seen to weaken.
Meanwhile, market apprehensions over Greece and its future in the Euro Zone are also deemed to weaken the outlook for the single currency. The government presented its latest austerity package amounting to about 13.5 Billion Euros in savings needed to secure international aid to parliament yesterday. With parliament expected to debate on the measure today and vote on it tomorrow, protests across public and private sectors are bound to greet them. Approving the tough reforms and passing the 2013 budget are crucial to receive a bailout installment that has been on hold for months. However, the Democratic Left Party, the junior member of the coalition government, is refusing to back the package. Amid such uncertainty, the Euro is believed to tumble further.
Adding to the market jitters is the US Presidential election today, and its potential effect on the looming “fiscal cliff.” If Congress is unable to agree on new arrangements, around $600 Billion in tax hikes and government spending cuts will take effect early next year, potentially inhibiting economic growth. Considering these, a short position is advised for the EUR/USD trades.
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