The euro lost ground against the other major currencies in early European deals on Tuesday, as German inflation slowed as initially estimated in June, and traders cautiously await a Greek parliamentary vote on third bailout package on Wednesday, as Greek Prime Minister Alexis Tsipras faces stiff resistance from its coalition partners for passing agreed reforms.
Final data from Destatis showed that inflation eased to 0.3 percent in June from 0.7 percent in May. The inflation rate as measured by the consumer price index decreased after four months of uninterrupted increase.
Month-on-month, consumer prices fell 0.1 percent, offsetting a 0.1 percent rise in May.
Although Tsipras was able to clinch the bailout deal with European leaders, he now finds himself in a surreal position politically as he has to convince his party and the Parliament to back tough austerity measures by Wednesday’s EU-imposed deadline or face the country’s bankruptcy.
The concessions Tsipras made on the bailout deal involving spending cuts, tax increases and reforms are tougher than those he and Greek voters resoundingly rejected just over a week ago, putting Greece in a humiliating position. With portions of his party in revolt and coalition partners rejecting the deal, Tsipras faces a tough task of selling the deal to the Greek people. Greece needs EUR 7 billion by July 20 and an extra EUR 5 billion by August.
European markets are trading mixed, as traders digested Greek deal news and await German economic sentiment index, due shortly.
The euro was trading in a negative territory on Monday despite the materialization of Greek deal at EuroSummit in Brussels. The currency dropped 1.16 percent against the pound, 1.4 percent against the greenback and 0.11 percent against the franc.
The euro performed in a mixed manner in today’s Asian session. While the euro fell against the greenback and the pound, it was steady against the franc and the yen.
In European trading, the euro dropped to a 4-day low of 135.27 against the yen, while touching 1.0964 against the greenback, its lowest since July 7. The euro ended Monday’s trading at 135.79 against the yen and 1.0996 against the greenback. The next possible support for the euro is seen around 133.00 against the yen and 1.05 against the greenback.
The single currency slipped to a 6-day low of 1.0405 against the franc, off its previous high of 1.0464. If the euro extends slide, 1.00 is possibly seen as its next support level. At yesterday’s close, the pair was worth 1.0451.
The euro dropped to a 4-day low of 1.6413 against the NZ dollar and a 5-day low of 1.3984 against the loonie, compared to Monday’s closing values of 1.6427 and 1.4013, respectively. Continuation of the euro’s downtrend may lead it to support levels of around 1.635 against the kiwi and 1.38 against the loonie.
On the flip side, the euro bounced off slightly against the pound, trading at 0.7109, off early low of 0.7091. The pair was worth 0.7099 when it closed Monday’s deals.
Looking ahead, U.K. consumer price and producer price indices for June, along with house price index for May, Eurozone industrial production for May and the German ZEW economic sentiment index for July are slated for release shortly.
In the New York session, U.S. retail sales data, import price index and U.S. NFIB small business index, all for June and U.S. business inventories for May are set to be published.
The material has been provided by InstaForex Company – www.instaforex.com