EUR/USD: Investors Avoid Risk as Greek and Fiscal Cliff Concerns Mount

Adding to signs that the economic condition in the Euro Zone is worsening are Friday's release of the French and Italian Industrial Production data which both declined in September. Output in France fell by 2.7 percent, the largest decline since January of 2009, triggering the Bank of France to indicate that the country could fall into recession. Also, industrial output in Italy declined by 1.5 percent, led by the energy sector. Meanwhile, concerns over the US fiscal cliff are sending investors away from riskier assets to the refuge of safer assets. In today's European exchanges, the bearish sentiment is likely to continue as the Eurogroup officials are set to meet today with Greece as the primary topic.

The victory of President Barack Obama continues to weigh on the Euro on concerns that he would struggle to convince Congress to agree on spending cuts to prevent the imposition of automatic spending cuts and tax increases that are believed by some to force the US economy into recession. As a result of the want of direction over the fiscal cliff, traders tend to rush to the safety of the Greenback.

Another factor for the Euro's decline is Greece, the main topic in today's meeting of the Eurogroup officials. After securing the approval of the Greek parliament over spending cuts, the finance leaders are said to delay the next tranche of bailout funds to Greece as they are still going to evaluate the approved austerity plan, if it would be sufficient to warrant financial assistance. With the future of Greece in the currency union hanging, sentiment towards the Euro is likely to wane. As such, a short position for the EUR/USD pair is suggested in today's European trades.

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