Euro hits two-month low against USD, Gold regains its shine

Euro: In the Euro zone, the single currency was hurt by a bleak economic outlook, growing concern over Greek aid and continued uncertainty over when, and if, Spain will ask for aid.

The Euro remained weak despite Greek Prime Minister Antonis Samaras securing parliamentary approval of austerity measures needed to unlock bailout funds. Furthermore, the European Commission trimmed its growth forecasts for the region and this continued to weigh on the single currency.

Last week even the European Central Bank President, Mario Draghi, managed to fuel investors' concerns. At the news conference following the Governing Council's decision to leave its key interest rates unchanged at 0.75 percent, Draghi said that the European economy was showing little signs of recovery despite the loose monetary conditions. Draghi remained tightlipped over Spain, reiterating it was the responsibility of governments to decide when to request aid, band only that would enable the central bank to start its OMT program. With regards to Greece, Draghi said the ECB was "by and large done" with its support for Greece.

Later, on Monday, the Eurozone Finance ministers were expected to meet in Brussels. Looking ahead the publication of the Eurozone and German GDP are expected next Thursday.

US Dollar: Despite Barack Obama's re-election as President of the United States, global stocks closed in negative last week even if the greenback continued to find support against its major counterparts.

No dramatic shift in the American economic policy is expected. Obama's victory paves the way for continued monetary easing by the Federal Reserve while the 'fiscal cliff' is looming.

An estimated $600 billion in government spending cuts and tax hikes will kick in early next year, unless US lawmakers take steps to alleviate the debt burden. With the Democrats likely to retain control of the Senate, and Republicans likely to increase their hold on Congress, the risk of political paralysis is likely to persist and concrete action to tackle the fiscal cliff might be difficult to get at.

Despite that the US Michigan consumer confidence index hit five-year highs last week; investors remained uneasy over the ability of US politicians to deal with the impending "fiscal cliff".

US President Barack Obama has so far signaled willingness to compromise in order to avert a looming fiscal crisis while at the same time he reaffirmed that a tax increase on the wealthy must be part of the deal.

This week investors will focus on the publication of the advanced retail sales data out of the US, expected to hit the wires by Thursday.

British Pound: Even the Bank of England opted to leave its interest rate unchanged on Thursday. The BoE's MPC decided to leave rates at record low of 0.50 percent and also decided to keep its current asset purchases target at £375 billion.

On the week the Sterling lost 0.76% to the greenback. The GBP was hurt by data showing that growth in the service sector slipped lower than expected throughout the month of October that dampened optimism that the economy was recovering.

At the time of writing, investors are looking forward to the publication of the UK's jobless rate that was due on Tuesday.

Australian Dollar: The Aussie hit a one-month high after the RBA unexpectedly kept its benchmark interest rate unchanged while analysts were anticipating a rate cut.

The RBA's comments indicated that they deemed inflation as being in line with expectations and growth close to trend, but the international outlook was more subdued than was the case a few months ago.

The Aussie dollar rose against most of its major peers after data showed Australian employers added more jobs in October than economists' had originally estimated. The number of people employed in Australia increased by 10,700 last month after rising a revised 15,500 in September. The strong figures reduce speculation that the Reserve Bank of Australia will cut borrowing costs next month.

The Aussie was also lifted by the Chinese trade data that hit a 5-month high in October on the back of better than expected exports, suggesting once again that the world's second economy is back on track after seven consecutive quarters of slowing growth.

Japanese Yen: On the Japanese front, the Yen lost ground against all of its major counterparts last Monday after the publication of GDP data showed the Japanese economy contracted for the third quarter.

The annualized figure for the third quarter was out at -3.5%, worse than the previous 0.3% and also slightly worse than the expected -3.4%. Compared to the previous quarter, Japanese GDP slipped by -0.9%, perfectly in line with expectations.

Gold: Gold was supported by expectations that US policy will remain loose for longer, given Barack Obama's re-election. XAU/USD hit a three-week high last Friday at $1738.25.

The author is a Senior Market Analyst for RTFX Ltd.