Contagion Fears Continue

With contagion fears once again in the spotlight in Europe, the single European currency saw a stop driven slide to fresh four month lows. With the spotlight of the European debt crisis now focused on the Euro Zone nations of Italy and Spain, the EUR/USD saw follow-through from the earlier New York lows just under the 1.4000 big figure as stops ended the decent near 1.3935. The move instigated a firmer dollar and yen as safety bets as regional equities faltered against the risk adverse backdrop. The quick skid from 1.3990 to 1.3945ish was instigated when new IMF President Lagarde made comments that “nothing should be taken for granted on Greece” as well as stating that the IMF has yet to discuss details about the second bailout with the EU. The London session will be closely monitoring the unraveling situation as well as the spreads between German bunds and the bonds of the PIIGS (Portugal, Italy, Ireland, Greece and Spain). A brisk sell off of Italian and Spanish bonds yesterday helped spread contagion fears like wildfire.

The weakened Euro helped see the EUR/CHF to a fresh all time low of 1.1660, while the EUR/GBP dropped from 0.8835 to 0.8775. The EUR/JPY, shed over a big figure from 112.95 to 111.70 while the other yen crosses followed suite. Looking further over in the South Pacific, the AUD/USD saw 1.0580 lows on an 80 pip slide while the NZD/USD erased over a big figure of value to 0.8190 lows. Across the currency spectrum, the story was the same as traders scampered to buy dollars and yen while abandoning the Euro.

Ahead in London the frequency of the chatter on the debt crisis will surely intensify, leaving markets vulnerable to commentary. As well, EU finance ministers will be on the front lines doing damage control while the yields of Italian and Spanish bonds so under the microscope.

Источник: Forex.com

12.07.2011