Socialists Lose in Spain, BOJ Monthly Report Upcoming

Euro extends losses after Spains governing party lost municipal elections but the moves at the open have been small. Later, the Bank of Japan releases its monthly report. EURUSD hits the prelim target mentioned in Friday's Premium "Intermarket Insights".

EUR/USD hits $1.31 and NZD is also lagging as markets open. Spanish voters turned on the austerity programs of Prime Minister Zapateros Socialist party who won just 28% of voters. The polls point to instability in next years general election.

Traders are following news of the volcano eruption in Iceland because it may threaten European air traffic. A larger eruption last year halted flights for six days, cost $1.7 billion and weighed on the euro. The volcano is continuing to spew ash but so far experts are saying there is no threat to Europe. Icelandic aircraft have been grounded.

In the UK, the BOEs Dale remained hawkish in an interview with the Telegraph, saying rates need to rise but also warning that hikes will cut into household income.

At 0500 GMT, the Bank of Japan releases its monthly report of recent economic and financial developments. In Thursdays unanimous decision to leave rates at 0.10%, the BOJ stuck to forecasts suggesting a rebound in H2. Last month, the BOJ forecast GDP growth of 0.6% in the fiscal year and 2.9% next year. The CPI was forecast to rise 0.7% this fiscal year. Downgrades to medium and long-term expectation will weigh on risk appetite.

By AB - AshrafLaidi.com Staff