The focus is clearly on the Euro as we open the week with GBP/EUR above 1.2150 and EUR/USD below 1.30 - In short EUR weak across the board.
The IMF/World Bank Spring Meetings start on Friday and ECB officials are already calling for the rest of the world to help increase the capital base of the IMF so that it could provide more of a firewall for the eurozone. Emerging market governments remain, unsurprisingly, unimpressed for the moment and hopes that €800 billion could be raised have already been scaled-back to €400-€600 billion.
Continued concerns about the periphery pushed euro-dollar below $1.30 for the first time since mid-February. Markets remain concerned that Spanish banks are unable to access wholesale funding and are having to rely on the ECB. Fears that the system will need recapitalising due to real estate losses also weigh on the single currency as the Spanish government would be unable to afford such a programme given current yields.
The main beneficiary of the fall in Euro is the US Dollar with a return to risk aversion meaning investors are returning the worlds funding currency. This has kept GBP/USD under check at below 1.5850.
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Posted in Daily Market News on May 30 2014