A successful Spanish bond auction helped ease some concerns about the debt crisis plaguing the eurozone’s most indebted nations and finally gave the market some interest and direction.
The euro hit a one month high against the Swiss franc and regained some ground against most of its counterparts following the news. News last night that Germany’s principal, Angela Merkel, may be willing to extend the EU’s relief fund helped to put investors mind at ease and the bond auction went through without a problem. Both the Portuguese and Spanish auctions were concerns at the start of the week, helping to suppress the single currency. However, with the US dollar’s weakness late in the session yesterday and the news of the Iberian sales going well, the 17 nation currency has appreciated to €1.19 and €1.33 against the pound and greenback respectively.
The outlook for EUR remains to the downside in the medium term however. With no plan set in stone and Southern Europe’s debt snowballing, one set of bullish data from the US could turn everything back on it head.
In other news, Timothy Geithner once again called for the People’s Bank of China to allow the yuan to appreciate. Its artificially low value gives China an advantage over the rest of the export market and makes American goods less competitive. However, it seems highly unlikely that the world’s second largest economy would give up such a strong opportunity to hunt down the ailing world ‘no 1.’
Should China do what is best for them or the world economy? To comment on this or any part of the blog please write a comment below.
Tom Hampton
Analyst – Caxton FX
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