Spain, of course, continues to be the main concern, feeling intensified yesterday after the unemployment figures showed that more than 4.7 million people can’t find a job. Market participants are wondering when rather than if the country will ask for financial aid, despite recent comments by President M.Rajoy and his strategy of buying time. According to P.Kinsella, researcher at Commerzbank, “a Spanish assistance programme has already been broadly priced in by the foreign exchange markets. However what has not been priced in is the reaction of the ECB”. The most likely outcome would be the European central bank pressing the ‘start’ button of the OMT programme, being the immediate consequences a pronnounced decline in bond yields. Whether this event would gradually vanish or, on the other hand, would be a definite change for the single currency, nobody knows for certain. What everybody does aknowledge is the bullishness that this event will carry for the euro.
in the view of J.Foley, Senior Currency Strategist at Rabobank, “we see any pullback in EUR/USD in the next few weeks as likely to be short lived”, reinforced by the late Fed announcements, depressing the demand for the safe haven USD. Hopes for further upside in EUR have echoed in the Swiss bank UBS, changing the outlook to bullish from neutral, pointing out that a breakout of the resistance level at 1.2988 would then target 1.3031 en route to 1.3085