The euro has fallen across the board again this morning, dropping to an 11-week low against the dollar hitting $1.2972 and enabling the pound to climb up to €1.1956.
The single currency has fallen by over 1% to sit just below the $1.30 level. A lack of confidence in the Irish bailout and growing concerns over the Iberian peninsula have caused the premium investors demand to hold Spanish bonds to soar to a lifetime high over their German counterparts. A lack of confidence is also weighing heavily on Portuguese, Irish and Italian bond yields. The effect is even starting to spread to other financially sound economies by association as Belgium’s spread widens.
Speculation on how far the euro can actually fall ranges from parity against the greenback to $1.25. However, the last two times the EUR/USD rate fell below its “200 day moving average”, the rate sank by 18% and 16% respectively, bringing $1.10 into play.
Data from the eurozone this morning has been flat, with a better than expected result in US consumer confidence later this afternoon, we could see the 16 nation currency fall even further.
Tom Hampton
Analyst – Caxton FX
