Forex Forecast

Focus On Spain News reports on Friday that Spain’s highly indebted state, Valencia, is set to seek the central government’s help to repay its debt led to heavy selling of the euro across the board.

Euro Still Under Pressure The euro remained under pressure in the European session, driven primarily by a further sell off in periphery fixed income space. Italian 10y yields pushed above 6% catching up to Spanish 10y which are comfortably above 7%.

Finance Ministers Discuss Spain Eurozone finance ministers are scheduled to hold a conference call at 1000GMT today – to sign off on the terms of Spain’s banking sector bailout.

AUD Continues To Shine EURUSD has managed to shake off the effects of the weak Spanish bond auction, but conviction is clearly lacking in a market facing a relatively light events calendar.

Spain Drives Market Sentiment Intra-day FX volatility spiked on Thursday, with the euro bouncing around a 60-pip range. The main catalyst for the move, which also drove other currencies was a series of headlines regarding Spain.

Spanish Auction Due AUDUSD nudged modestly higher overnight, largely on the back of some respectable Q2 earnings reports which helped to boost US equities. An unsubstantiated newswire headline supplied some further momentum claiming that a reserve manager intends to diversify into Australian assets in Q3.

Searching For Guidance While the euro has managed to regain its composure, the tone remains heavy amid generally thin conditions. Chancellor Merkel’s reported comment that “we haven’t yet shaped the European project in a way that we can be sure that everything will work” weighed on sentiment, which was certainly not helped by former ECB […]

EUR Weakness Persists Euro weakness across the board continued in the European session. Overall risk appetite was fairly stable across other markets but the euro pushed lower versus both safe-havens and risk currencies.

Watch The BoE Vote Split EURUSD held onto most of its gains overnight in the wake of Fed Chairman Bernanke’s first day of congressional testimony. We doubt this will last and expect to see the euro come under fresh downside pressure shortly.

Maybe September Those hoping for clear QE hints from Fed Chairman Bernanke ‘s testimony in front of the Senate Banking Committee were disappointed.

UK CPI Drops Again Directional conviction was lacking in the European session, with investors cautious of adding to positions ahead of Fed Chair Bernanke’s Senate testimony.