Markets await US elections with Obama victory priced in as Greek aid negotiations continue

Tom Tong06/Nov/2012Currency Updates

EUR

The euro languished near a two-month low versus the dollar on Tuesday, with its outlook clouded by uncertainty over a Greek parliamentary vote on austerity steps needed for Athens to secure international aid. The euro eased 0.1 percent staying near the previous day’s low, the single currency’s lowest level in about two months. The Greek parliament will decide to approve or reject on Wednesday the government’s package of measures including cost cuts and tax hikes that should amount to 13.5 billion euros ($17 billion) by 2016. Approval of the reforms and the passage of the 2013 budget are crucial to unlocking 31.5 billion euros in aid from an IMF and EU bailout that has been on hold for months. A senior EU official had earlier cast doubt on whether a deal on Greece could be struck next week. However, Rehn said a deal would be struck next Monday, when eurozone ministers, called the Eurogroup, meet in Brussels.

GBP

This week’s session started badly for sterling with this morning’s release of the latest UK PMI Services sector survey, which revealed a larger than expected drop-off in growth levels in this key sector of the British economy last month. GBP/USD’s trading range was largely unaffected by the overnight news including the RBA decision to hold rates at 3.25%. UK Industrial and Manufacturing Production are scheduled for 09:30 GMT.

USD

National opinion polls show President Barack Obama and Republican challenger Mitt Romney in a virtual dead heat, although Obama has a slight advantage in several vital swing states. Traders said the market was also in a wait-and-see mode ahead of Tuesday’s U.S. presidential election. The key data release during last week’s session in the currency markets came during Friday afternoon’s European session, when the latest set of US employment figures were released. With the US Presidential Election taking place today, the way the jobs numbers were interpreted depended largely upon which side of the political divide you were sitting. Democrats chose to concentrate on the larger than anticipated 171,000 new jobs which were generated in the US last month and were keen to point out that the data revealed that more American workers now had jobs than when President Obama took office. Meanwhile, Republican supporters focused on the increase in the overall rate of unemployment in the States from September’s 7.8% to 7.9% last month, citing this as evidence that the American economy has not turned a corner during Obama’s four year tenure and that it was time for a change in the form of their man Mitt Romney.

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Written by Tom Tong

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