Spanish Data Halts Euro Rally
Justin Burkhardt | FXFocus.com
Back to square one. Spain is in the spotlight once again with data unsettling enough to shatter the Euro’s 4 month rally against the dollar. Record unemployment coupled with depressing growth data and political woes paint Spain to look like a sinking ship.
Spain’s Gross Domestic Product (GDP) contracted 1.8% in the fourth quarter of 2012 from the year prior. The news just added coal to the fire, coming only one day after the announcement that Spain’s retail sales had fallen 10.7% in Q4 compared to a year ago. This is the 30th consecutive month that Spain’s retail sales have fallen… and the decline is largely blamed on a hike in the value added tax (sales tax).
To make matter worse, Mariano Rojoy (Spain’s Prime Minister) is being pressed to resign from his post on allegations of corruption.
"The prospect of Rajoy's resignation has roiled markets as any fresh political instability in (the) euro zone's most important periphery economy could undermine the sense of investor confidence and send Spanish yields higher, making it much more difficult for the government to implement its austerity measures," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
Clearly the implications of a Rojoy resignation, if that were to come to fruition, would ripple throughout the Euro-Zone…
The EUR.USD pulled out a full on reversal, which began in the European session and continues through the U.S. session today. The news did come as a bit of a shock, but Forward Thinking clients were prepared for this directional change in the EUR.USD. Last night I issued my weekly analysis of the EUR.USD painting a bearish picture for my clients. I stated that all signs pointed to a “correction”, the pair dropped an astonishing 138 pips from that market update through today.
Insights such as these have positioned Forward Thinking clients to remain ahead of the curve, a true advantage in this market. Isn’t it time for you to get on the right side of this market?
EUR – Euro-Zone Retail Sales (Tuesday)
EUR – European Central Bank (ECB) Rate Decision (Thursday)
Your currency analyst,
Disclaimer: I have no positions in any of assets mentioned, but may initiate a (long or short) position in the EURUSD over the next 72 hours