EUR/USD Breaks 1.3 After France And Greece Elections

Euro drops sharply as the week starts as election results in France and Greece raised concerns on the countries' commitment to Austerity measures and the stability in Eurozone. Socialist Francois Hollande won the French election with 52% vote, making him the first socialist candidate to be elected since 1981. That also ended the famous "Merkozy" leadership in Eurozone which pushed for regional wide austerity as they're still struggling with the on-going debt crisis. Hollande has criticized the German-led austerity program and stated that "austerity is not inevitability". Instead, Hollande emphasized giving "European construction a growth dimension". Moreover, he suggested that the ECB should act to help resolve the problems more actively and supports the joint issuance of Eurobonds. Without synergy between the two biggest economy in Eurozone, there will definitely be increased headwinds in pushing for reforms in the region.
 
Meanwhile, the Greek election is also in focus and the situation is more worrisome. Exit polls indicated that the New Democracy and the Socialist Pasok party, the 2 pro-bailout parties, will have at most a 1 seat majority. And indeed, these two main parties could eventually end up falling short of majority in the 300-seat parliament. Coalition of the Radical Left, an anti-bailout party, would claim second place. It's uncertain what government would be formed after the election and how long could the government last. A pressing concern is the new government's attitude to what's agreed for the bailout. Greece needs to detail some EUR 11.5b in fresh spending cuts for next tranche of bailout payment in June. IMF has said that firstly, troika won't visit Greece before new government is formed and ready to finalize the austerity agreed. Secondly has just reiterated that "if there's no agreement on the new cost-cutting, the payments for Greece will be withheld until there is a satisfactory understanding".
 
More in Elections in France and Greece - Increasing Uncertainty in Fiscal Reforms.

Overall market sentiments were also weighed down by Friday's US job data. Asian equities are broadly lower today with Nikkei down -2.4%, Hong Kong HSI down -2.4%. Crude oil dipped further to as low as 95.34 while gold is softer afte around 1640 level. Dollar index, on the other hand, breached 80 and continues to press this level at the time of writing. Yen is even stronger than dollar as USD/JPY is pressing last week's low of 79.64. EUR/USD's break of 1.3 psychological level today is an important sign of the bearish sentiment and we'd likely see deeper fall ahead this week towards 1.2625 low.
 
On the data front, Australia building approvals rose 7.4% mom in March, retail sales rose 0.9% mom in March, NAB business confidence rose to 4 in April. All data were better than expected but provided little support to Aussie. Swiss Unemployment, foreign currency reserves, CPI, Eurozone Sentix investor confidence, German factory orders and Canada building permits will be released later today.