Greece’s political impasse following an inconclusive May 6 election has raised the possibility that another contest will have to be held as early as next month, threatening the implementation of austerity pledges. The standoff has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010 and stoked speculation it will have to leave the currency union. Gross domestic product in the 17-nation euro area probably declined 0.2 percent in the first quarter from the prior three months when it slid 0.3 percent, according to the median estimate of economists in a Bloomberg News survey.
The European Union’s statistics office will release the figures on May 15. The European Commission is scheduled to release its forecasts Friday for the region’s growth, inflation, employment and public finances. “The bottom of Europe’s economic slowdown has yet to be seen,” said Yuki Sakasai, a currency strategist in New York at Barclays Plc. “The euro will remain under downward pressure.” The euro also weakened against the British pound, declining to as low as 79.97 U.K. pence, the least since November 2008.
The pound has gained 3.6 percent this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen was the biggest loser with a 4.6 percent decline. Goldman Sachs Group Inc. cut its forecasts for the euro to $1.33 from $1.38 for the next six months and to $1.40 from $1.45 in 12 months, the New York-based company said in a note Thursday. Economic data suggest an expected rebound in the euro will be delayed, Goldman Sachs said. Credit Suisse Group AG also slashed its projection for the currency, reducing it to $1.25 in three months from $1.29. The European Central Bank will add to monetary easing if fiscal austerity proves “too painful,” Credit Suisse said in a report Thursday. Australia’s dollar, known as the Aussie, weakened against most of its 16 major counterparts on concern a slowdown in China’s economy will reduce demand for commodity exports. China’s industrial production rose 9.3 percent in April from a year earlier, the National Bureau of Statistics said Friday, compared with the 12.2 percent gain projected by economists. Retail sales increased 14.1 percent last month, while economists had forecast a 15.1 percent increase. China is Australia’s biggest trading partner.
The Aussie dropped 0.4 percent to $1.0044. New Zealand’s dollar is likely to stay lower as it approaches support levels, according to JPMorgan. The so-called kiwi fell below a four-month low of 80.59 U.S. cents last week, which maintains the downside bias for the currency, Niall O’Connor, a technical analyst in New York at JPMorgan, wrote in a research note Thursday. Key tests include a 61.8 percent retracement of 77.91 from a November low to a February high, according to the analyst. There remains “little evidence of a sustained reversal,” O’Connor wrote. [Blommberg] - Ekathimerini.com