EUR USD (1.4380) A view of the eurozone in terms of risk presently reveals a rather jagged topography. In Italy the country’s economic growth is faltering, and Spain braces itself for contagion risk as it seeks to launch €3.5bn in two bond auctions on Thursday.
Ireland busies itself with damage control as the prime minister and the finance minister have both responded to the transportation minister’s recent statement that the Republic may need another bailout next year. Germany, in contrast, is apparently softening its stance vis-a-vis loans to Greece. The Wall Street Journal reports this morning that Berlin is considering a short-term reprieve on Greece’s bondholders, in that it may not press them to immediately share the burden of the country’s second bailout. The forex market reacted this morning to this perceived willingness to table any plans for debt restructuring.
The euro bolted above $1.44 today after the previous day’s mostly sideways holiday sessions. The news of Germany’s supposed concession left a number of euro-bears exposed to a short-covering rally, and the market had already been thinned out when operators in the US and the UK squared outstanding positions in preparation for the long weekend last Friday. For that reason the euro is presently more sensitive to buy orders than to sell orders. The single-currency has the potential to reach 1.4440 or even 1.4540 today. This scenario is valid as long as the stability threshold at 1.4130 remains in place.
Market Bias Index
Apart from the Swiss franc, we tend to see a general narrowing in the Market Bias Index today. The EUR/JPY, in particular, found its way back to perceived ‘fair value’.
Deutsche Bank
Fixed Income Research – Global