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EUR/USD update (16th May 2012, 06:00)

In US trade, is was a case of same story, different day, with Greek issues once again trumping everything else, just as it did for most of last year.

The news out of Greece overnight was that it is set for elections again in June after a two-hour meeting of five party leaders yielded no breakthroughs in forming a new government. Though this was not a surprise, the clear lack of any middle ground among the various parties at the table triggered a sharp 'risk off' reaction, with the euro slumping 80 pips on the announcement.

Also hurting sentiment towards the shared currency were reports that €700 million of cash deposits had been withdrawn from Greece’s major banks in the week and a half since the stalemate election. Some are now suggesting that Greek citizens now see ‘cash under the mattress’ as being a safer option than cash in the bank. These negatives overshadowed some of the more positive news on the day, namely that German GDP came out stronger than expected (+0.5% versus a +0.1% consensus), and that fact that Greece met its €0.4 billion foreign-law bond redemption.

Having ended yesterday’s Australian trade around the 1.2850 level, the euro slumped to close the US session at 1.2729. Upon reopening for the Asian session, the euro is little changed, continuing to trade in the high-1.2720s.

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EUR/USD update (16th May 2012, 06:00)

In US trade, is was a case of same story, different day, with Greek issues once again trumping everything else, just as it did for most of last year.

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