Emmanuel Ng of OCBC Bank note that major currencies slid against the USD and the JPY on Monday as potential political deadlock emanating from the Italian elections soured EUR as well as global sentiment.

Looking at the Euro, he is expecting it to continue to be weighed in the near term as markets await news of a possible coalition and the resultant stance towards reforms. Ng notes that initial reports indicated that the center-left (quasi-EUR positive) could have garnered a slim lead but this was contradicted by subsequent reports.

Meanwhile he notes that price action on the Yen crosses were particularly acute given the temptation for profit taking with a market already laden with JPY shorts. Going ahead, he feels that more negativity may well be in store for the market as the 1 March 2013 sequestration deadline looms and with little indication of progress between US President Obama and Congress. Elsewhere, he expects investors to remain watchful towards the nomination of the BoJ Governor, expected next week, with ADB Governor Kuroda widely touted to be a front runner. Ng is expecting JPY bearishness to remain an underlying market theme.