FXstreet.com (Barcelona) - The risk aversion sent in late NY session yesterday continues throughout Asia and Europe. The Eurozone headlines show some undecided issues regarding the “legacy assets” talked in the June summit about how Irish assets would be handled. The German-Finnish-Dutch front is putting it into question as it affects Spain, but the Irish PM said today that those decisions regarding Ireland's bank debt will stand.
TD Securities analysts also point to worries regarding Spain as the region of Catalonia moved up elections to November 25th: “This has been raised as a vote on the merits of secession, but it should be made clear that this is a clear vote on sentiment and legal secession from Spain would require a much longer process, involving authority from the central government to hold such a vote and changes to the Constitution”, wrote analyst Richard Kelly, expecting further negotiations on devolving further powers to the local level in order to reach a political compromise, and stating that any give is limited by the need to continue the sovereign fiscal tightening.
“Spain’s budget, banking, and structural announcements over the next two days are brought further into focus then, and as we expect the government to disappoint on requesting a bailout over the next few days”, said Kelly, pointing to the widening of peripheral spreads including the Spanish 10-year yield above 6%, risks of a Moody’s downgrade potentially by the end of this week and comments from the Bank of Spain that the latest data is consistent with GDP falling at a “significant rate” in Q3. In conclusion, peripheral worries have taken the EUR/USD down to 1.2850, but broader markets are relatively intact.
TD Securities analysts also point to worries regarding Spain as the region of Catalonia moved up elections to November 25th: “This has been raised as a vote on the merits of secession, but it should be made clear that this is a clear vote on sentiment and legal secession from Spain would require a much longer process, involving authority from the central government to hold such a vote and changes to the Constitution”, wrote analyst Richard Kelly, expecting further negotiations on devolving further powers to the local level in order to reach a political compromise, and stating that any give is limited by the need to continue the sovereign fiscal tightening.
“Spain’s budget, banking, and structural announcements over the next two days are brought further into focus then, and as we expect the government to disappoint on requesting a bailout over the next few days”, said Kelly, pointing to the widening of peripheral spreads including the Spanish 10-year yield above 6%, risks of a Moody’s downgrade potentially by the end of this week and comments from the Bank of Spain that the latest data is consistent with GDP falling at a “significant rate” in Q3. In conclusion, peripheral worries have taken the EUR/USD down to 1.2850, but broader markets are relatively intact.
