Euro and Aussie slump continues

The single currency extended its losses after a raft of mediocre economic releases, including a rise in German unemployment and benign inflation.

Euro
Source: Bloomberg

The CPI flash estimate was in line at 0.3%, while the core reading fell short at 0.7%. The market was expecting 0.9%. Remember ECB President Mario Draghi has already said that anything under 1% is uncomfortable. This resulted in EUR/USD slumping to a low of $1.2571 (the lowest since August 2012) before recovering to $1.2630.

The single currency is likely to remain offered heading into tomorrow’s ECB meeting. Later today we have a raft of PMIs due out for Europe. This is likely to set the tone for the euro and any disappointment will probably lead to further selling.

Retail sales disappoint

After having held reasonably well over the past 24 hours, AUD/USD has resumed its slide once again on the back of a disappointing retail sales reading. The figure fell well short at 0.1% when the market was expecting 0.4%.

AUD/USD retested Monday’s lows and I continue to feel we could be testing January lows at $0.8660 in the near term. A break of this level will see the pair trade at levels not seen since July 2010. With plenty of action to come on the USD side of the equation, any beats could result in further weakness.

AUD/USD
Click to enlarge

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