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Euro Weakness Persists Amid European Banking Sector Concerns

FOREX
  • Pressure on banking stocks was present again early Friday, weighing on the likes of the Euro and prompting an early surge for the US dollar and the Japanese Yen. Names such as Deutsche Bank were knocked by worries that regulators and central banks have not yet contained the current crisis, placing particular pressure on EURJPY which fell as much as 1.9% during European trade.
  • PMI data from across the Eurozone saw mixed results, with composite indices beating expectations thanks to a healthier services sector, although disappointing manufacturing reads added to the bearish sentiment for the single currency.
  • Despite a recovery for risk sentiment during US hours, the Euro is showing losses of around 0.7% against both the dollar and then yen as we approach the close.
  • The slightly more optimistic backdrop approaching the week’s close weighed on the Yen with USDJPY set to close around 130.70 despite an early slide to 129.64 on Friday. The turnaround across higher Beta FX was also noticeable in LatAm where USDMXN fell from early highs of 18.80 to around 18.45 approaching the close.
  • Overall, the USD index (+0.58%) has stabilised after a consistent grind lower both before and in the immediate aftermath of the Fed decision this week. Despite dipping briefly below 102 on Thursday, the DXY looks set to close the week on a surer footing and back above the 103 mark. The broad greenback strength on Friday was enough to depress the likes of AUD (-0.55%) and NZD (-0.80%).
  • European clocks adjust for daylight saving this weekend and German IFO data will kick off the docket on Monday. Australian and Eurozone CPI prints highlight next week’s calendar.
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