EUR USD (1.4080) The euro began to flag by mid-morning in Friday’s European session as traders traded dark scenarios of the weekend elections in Spain, the most salient of which was the motivation of a new regional government to expose any debt hidden by the incumbent party. An announcement on the Norwegian Foreign Ministry’s website late on the previous day also cast a shadow on the euro. Norway suggested that Greece hadn’t met its obligations to pay 50 percent of each grant-funded project and therefore suspended the €30m of development funds. Norway also questioned whether Greece had even forwarded its previous donation to the designated recipients. Many market participants now wonder whether other Scandinavian countries will refuse to continue funding Greece. Fitch downgraded Greek debt to B+ from BB+, bringing its ratings in line with S&P and Moody’s and leaving its outlook set to negative watch. Meanwhile, Austria’s Der Standard reported that Christine Lagarde sees Greece at risk of bankruptcy if it doesn’t bring its finances into order. The frontrunner for the IMF executive position said that she would favour a unilateral offer of private lenders to lengthen payment time frames – but that there won’t be a restructuring. Apart from the strain on the euro attributed to the peripheral nation’s funding shortfalls, traders chalked Friday up to the ‘risk-off’ column with the euro falling alongside oil and equity prices. The stability hurdle (1.4440) will probably remain out of reach today, as meaningful resistance stands already at 1.4235. The risk extends to 1.3910.
Market Bias Index
The US dollar’s gains on Friday (except versus the Swiss franc) register on today’s Market Bias Index – it holds an overvaluation bias against the euro.
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http://www.easyforexnews.net/uploads/2011/05/GDPBD00000183448.pdf
Deutsche Bank
Fixed Income Research – Global