EUR Pressured by Political Uncertainty

By: Barbara Zigah

The Euro remains under pressure in the wake of Eurozone elections but analysts say that short covering could provide some support. The Euro earlier slipped lower in Asian trade but managed to stay above Monday’s 3-month low of $1.2955; as reported at 1:44 p.m. (JST0 in Tokyo the EUR/USD was trading at $1.3031, a loss of 0.2% from overnight trade in the U.S.

Now that the voting is finished in Greece and France, markets are anxious to hear exactly what the new governments intend to do, especially as regards the austerity plans that had been committed to by the previous governments given that they swept into power by an anti-austerity movement. In Greece, especially, long on the verge of collapse, an attempt yesterday to form a coalition government failed, even as finance ministry officials warned that the country could be bankrupt by the end of next month if negotiations for the next E.U./IMF tranche payment are not soon begun.

It is the political uncertainty in the Eurozone which, more than anything else is weighing on the common currency. One analyst believes that a long-term bearish trend will continue to prevail given that, and only the need to short cover those initial bets will provide support.