Euro crumbles down to four-month low levels

Last week, the market was mainly driven by the events that occurred in Cyprus. In the week ahead, the heavy economic calendar will certainly be the main focus for market players. Indeed no less than four Central Bank meetings are scheduled; in case of unexpected decisions taken the market could move violently.

EUR

Euro lost ground last week over contagion risk concerns. The European currency approached four-month low levels due to the sell-off. Since the start of the crisis in mid-March, the euro lost no less than 2 per cent.

Political turmoil in Italy, struggling to form a government has also weighed on the currency. Last week demand for Italian government debt fell at an auction on Wednesday.

Despite unexpected rise in retail sales data in Germany for February, euro came back to reality after unemployment figures came out stable at 6.9 per cent.

Even if the euro climbed slightly on Friday mainly due to profit taking over EUR/USD, it lost 1.3 per cent over the week to $1.2820 against the dollar. Euro weakened as well against the pound losing 1.1 per cent to £0.8459.

USD

Last week from the US, we witnessed the S&P500 reaching all-time highs at 1570. The dollar benefitted from on-going Cyprus concerns. Demand for safe-haven assets resulted in capital flows towards the dollar. Indeed, the EUR/USD pair weakened the whole week reaching a low of 1.2757.

However, there was little to no reaction in currency markets to data released Friday by the Commerce Department showing that US personal spending climbed a seasonally adjusted 0.7 per cent last month. A separate report showed that US consumer sentiment rose in March to the highest level since November.

This week we expect a heavy economic calendar for the US economy. Most watched data will be the factory orders to be released on Tuesday, followed by the change in non-farm payrolls and the unemployment rate on Friday.

GBP

GBP/USD lost ground during the first half of the week before recovering slightly during the second half. GBP/USD closed the week next to key level of 1.52.

This week, major macro events for the UK economy will be the Bank of England Asset Purchase Facility which is expected to amount to £375B as well as the interest rate decision which is expected to remain unchanged at 0.5 per cent. Both will be released at 1:00 pm (CET) on Thursday 4^th of April.

JPY

JPY strengthened further last week due to concerns over Cyprus. Indeed, investors in search of a safe haven currency were driven to the Japanese yen despite all measures that have been taken by the Bank of Japan late last year to weaken the Nipponese currency.

The euro wasn't the only one to lose ground against the Japanese yen, losing approximately 1.8 per cent over the week sending the EUR/JPY to 120.75, but also the greenback weakened slightly losing 0.4 per cent over the week to 94.18.

Last week Kuroda, the new Bank of Japan Governor failed to surprise investors who were expecting more dovish measures to be taken to fight deflation and keep the yen's weakening on track.

This week JPY traders will be focused on the Bank of Japan interest rate decision and the following press conference to be released on Thursday the 4^th at 5:00 am (CET) as well as the Bank of Japan's Monthly Economic Survey and the Leading Economic Index on Friday.

AUD

The AUD started to lose ground on the 26^th of March last week. Indeed the AUD/USD pair reached a weekly high of 1.0497 before reversing and starting to go in a downtrend for the rest of the week and close at 1.041. Bad macro data coming from China weighed on the pair.

Monday morning, Chinese macro data for manufacturing activity came lower than expected and right after the release, AUD/USD lost ground. In one hour, the pair went from 1.0411 to 1.0391 which represents a significant loss of 20 pips.

This week, the Reserve Bank of Australia will be the first to meet; the interest rate decision to be taken will most likely be to keep its rate unchanged at 3%. The decision will be released tomorrow at 5:30 am (CET).

Gold

Gold traded sideways last week also driven by Cyprus worries. The precious metal dropped to a weekly low on Monday reaching 1'589$/ounce before recovering slightly. Another interesting move on gold was the spike from 1'591$/ounce to 1'608$/ounce that occurred on Wednesday. Gold closed the week around key psychological level of 1600$/ounce.