FXstreet.com (Barcelona) - According to Gareth Berry, FX Strategist at UBS: "With Spanish 10y yields closing well above 7%, risks that Spain may request a fullyfledged EU/IMF bail-out are clearly rising unless the ECB directly intervenes in the bond market via its long-dormant SMP program." Meanwhile, "negative 2y yields in the core sovereign bond markets show that capital flight out of the Eurozone's periphery is worsening," he said. Furthermore, "Moody’s has already placed Spain on review for a possible downgrade and that the sovereign is only a single notch away from junk status," he added.
"Euro remains under pressure – against the dollar and on all the major crosses except EURCHF. We expect this trend to continue and note the next big technical support level is at 1.187 in EURUSD." He forecasted.
Berry also highlighted that in a weekend interview in Le Monde, ECB President Draghi said that "inflationary pressures are falling faster than was expected (even as recently as the last ECB board meeting). We see this as a clear signal that another rate cut is on the cards, and the comments support the view of our European economists who think we could see another cut to the refi rate as early as September."
"Euro remains under pressure – against the dollar and on all the major crosses except EURCHF. We expect this trend to continue and note the next big technical support level is at 1.187 in EURUSD." He forecasted.
Berry also highlighted that in a weekend interview in Le Monde, ECB President Draghi said that "inflationary pressures are falling faster than was expected (even as recently as the last ECB board meeting). We see this as a clear signal that another rate cut is on the cards, and the comments support the view of our European economists who think we could see another cut to the refi rate as early as September."
