Events in the single currency region are deemed to cause a pull on the Euro opposite the US dollar. Things are once more getting tough for the Euro Zone, and the markets are again on edge.
Yesterday, the day before the troika of international lenders arrives in Greece to assess the nation’s financial state, Moody’s Investors Service changed its outlook for top-rated Germany, the Netherlands and Luxembourg to negative from stable. It is estimated that the financial support needed to aid indebted Euro Zone states such as Spain and Italy is coming at a greater cost.
Rising uncertainty in the currency bloc led Moody’s to cause the blow on the Euro powerhouse economies, citing the fallout from an increased likelihood of a Greek exit from the Euro and possible greater costs for supporting countries like Spain and Italy.
On Sunday, Greek Prime Minister Antonis Samaras admitted that Greece is in a “Great Depression” similar to the American one in the 1930s. The troika of the European Commission, the European Central Bank and the International Monetary Fund arrives in Athens today to assess how far off course the country is from its bailout targets. They are expected to push for further austerity measures if the debt-laden country wants to qualify for further rescue payments and avoid a chaotic default. Greece is clamoring for more help as efforts to cut its debt to 120 percent of gross domestic product by 2020 fall short.
Meanwhile, worries that Spain will end up seeking a full bailout from international monetary authorities dragged down markets around the globe yesterday. Bob Parker, Senior Advisor at Credit Suisse, states that, “There’s this vicious circle of investors not buying Spanish bonds, depositors moving out of Spanish banks, the problem with the regions and the problem that the recession in Spain shows no sign of turning around.” In fact, Spanish 10-year bond yields hit a fresh Euro-era high of 7.52 percent yesterday, increasing that the prospect of a full bailout looks closer.
All these fresh anxieties point to risk aversion in the financial markets. Looking at the stocks movement in the Asian session trades, the rate cut by Moody’s led Asian equities to fall. It is likely that exchanges in this London session would follow suit as data on the region’s manufacturing index is forecast to post a 12th consecutive month of contraction. The services index is expected to see a sixth straight month of underperformance. It is thereby no surprise should a rally for safety investments ensue in the impending market exchanges. As such, a short position for the EURUSD is suggested today.
Article by AlgosysFx Forex Trading Solutions