Early Asian trading saw the Euro make gains against most major currencies following on from Saturdays deal between Eurozone ministers to lend Spain up to 100bn euros to help its banking system. The bail out was hailed by Spanish PM Mariano Rajoy as a victory for the Euro and was indeed welcomed by the International Monetary Fund (IMF) as well as the US and Japan. Early Asian trading indicate that the markets are reacting positively as the loan was larger than expected and has helped remove uncertainty over the crisis… At least for now anyway!
Spain is the eurozone’s fourth-biggest economy – twice the size combined of those of Greece, Ireland and Portugal, the countries bailed out so far and has become the fourth eurozone country to seek emergency lending, following Greece, Portugal and Ireland. Rating’s agency Fitch cut Spain’s credit rating by three notches to triple-B on Friday and warned of further cuts if the country does not stabilize its banking sector.
The decision to assist Spain sparked relief demand for the euro and sent reserve currencies such as the yen and dollar tumbling. The US Dollar index which measures the USD against a basket of 6 weighted currencies was down 0.73%, valued at 82.3, whilst the biggest movement was seen in the EUR/USD pairing, up 0.93%, trading at 1.2634. The USD/JPY hit 79.63, up 0.22%, up from a low of 79.40 and off a high of 79.72.Support was seen at 79.40, the earlier low, and resistance seen at 79.73, the high of June 8.
Investor focus should stay with Europe when European markets open – France is to publish its latest industrial production figures, a key gauge of economic health, then in the US, Federal Reserve Bank of Chicago President Charles Evans is due to speak in public later in the afternoon.
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