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EUR/USD: Euro Notably Declines, Struggling on Union's Future
The single currency was trading with notable losses against the greenback on Tuesday, as mounting worries over Brexit snapped the EUR/USD pair's moderate rebound seen yesterday.
The latest polls surprisingly unveiled the revival of the 'Leave' camp, leading some analysts and bookmakers to anticipate odds favoring Brexit by the end of the week, following a sharp decline from the almost 80% probability of the UK staying within the European Union seen just a week ago.
''Brexit seems to have gained traction over the last few days, according to the latest poll. The actual consequences of a Brexit are difficult to price in and the market is closely monitoring the polls,'' Swissquote Research market strategist Arnaud Masset noticed.
In addition, German Bunds highlighted the current risk-off mood, as yields on the benchmark 10-year notes fell into negative territory for the first time, a strong signal of rising demand for safe asset classes.
Therefore, the EUR/USD dropped 0.87% to $1.1191 during the US market hours, while the US dollar index rose a strong 0.73% to 95.10 points.
On Tuesday, the single currency recorded a significant loss against the US dollar. The session started at 1.1290 and closed 86 pips lower. After steady downtrend the pair broke through the first support at 1.1286. Next support is located at 1.1100 and the resitance now is located at 1.1286.
April 2016 Eurozone trade balance 27.5bn vs 26.0bn exp
April 2016 Eurozone trade balance report 15 June 2016
A good pick up in activity this month and the trend is clear for the surplus.
On Wednesday the single currency was trading elevated against the US dollar, following the highly awaited FOMC decision. The pair opened at 1.1206 and closed 52 pips higher. If the uptrend continues, the pair will move to the first resistance located at 1.1286.
ECB's Mersch warns against further moves
Comment from ECB Governing Council member Yves Mersch
Mersch said further rate moves would carry increased risks and that the ECB should be very cautious.
He also had the gall to say that there is no evidence that bond markets have been significantly distorted. What more evidence could there be than negative rates?
Will EU Make UK Pay Dearly for Brexit?
Credible political elites in Brussels' Berlaymont, and across the whole of mainland Europe too, consider the European common bloc as a symbol of prosperity and peace where, apart from some occurrences of cyclical financial crises, the post-war economy and the wellbeing of its citizens have flourished to a level never seen before in the history of the continent.
This week in the UK, supporters of Britain's exit from the EU, a so-called Brexit, kicked the hornet's nest when they said they hoped that the UK's departure from the EU after the June referendum would trigger the end of this Union, and "liberate" the nations of the Old Continent from Brussels' political elites.
The EU as an institution has its own flaws. Detrimental bureaucracy and red tape abound. But the remedy for this illness should not lead to the disintegration of the common bloc, but to reforms – the reforms that UK Prime Minister David Cameron sought to push through in Brussels late last year, and partly succeeded.
The fact that the UK's Brexiters hope for the disintegration of the Union is madness, especially at a time when support for radical left or right-wing movements across Europe has been rising sharply, and whose fundamental aim is exactly the same – the decomposition of the common bloc.
So if Britain divorces the European bloc after the June vote, and Brexiters cheer in vain, then there is a possibility Britain will have to pay a high price for its exit. Not that much for the actual leaving, but for the fact that the UK's anti-EU political elites are those thirsty for the disintegration of the EU, something Brussels loathes to hear.
I was lucky enough recently to have a conversation in London with a friend of mine, a journalist and a profound man of letters, who said that the biggest weakness of the Brexiters is that they ignore one simple thing, which we all have observed at some point in life - if a marriage breaks up, and if there are actual assets and incomes to be divided, nastiness ensues every time it happens.
"Like in a divorce, people want to hurt the partner that leaves. Politicians in Brussels and elsewhere across Europe are human, after all, so will most possibly react the same way, and that, apart from being irrational, will be rational too - to show others in Europe that it is a bad, very bad idea to quit the EU," my friend argued.
The single currency recorded a slight decrease against the US dollar on Thursday. The session started at 1.1258 and ended 34 pips lower. On downwards first support is located at 1.1100. Resistance is located at 1.1286.