Spanish bailout lacks market support as Cyprus look next to ask for bailout funds
12/Jun/2012 • Currency Updates•
Yesterday the pound lost some ground to the Euro early on but retraced as Spanish bailout optimism tempered during the American session. This loss of momentum boosted the greenback across the board and coupled with the BoE’s Adam Posen comments on QE saw the pound fall against the Dollar.
GBP/USD dropped more than 0.5% from its day’s high, as Posen suggested the BoE should buy small business loans as an alternative form of QE. However, the 200-hour EMA helped to contain the slide and the pair is currently trading around its key support level. The RICS Housing Price Balance survey released by the Royal Institution of Chartered Surveyors showed strength in the UK housing market as internal demand in the UK economy remained robust.
The euro continued to lose ground against the dollar while Spain’s 10-year sovereign yields reached 6.50%. EUR/USD has completely filled the bullish gap left at the Asian opening, and recently slid below the 1.2500 level to hit a daily low of 1.2482 before bouncing slightly. There was continued concerns for Spain as Fitch has downgraded Banco Santander’s (Santander) and Banco Bilbao Vizcaya Argentaria’s (BBVA), the two biggest banks in Spain, to ‘BBB+’ from ‘A’. Also, the cypriots where the latest EU nation to suggest a bailout would be necessary in the short term.
The dollar Index was marginally up yesterday but the Greenback continued to trade a relatively tight range as the issues in Europe continued to dominate the headlines. The six year slide in house prices in the US, combined with the dollar weakness against some emerging market currencies has seen a ‘property binge’ from overseas investors in Asia, Canada, Europe and Latin America looking to get safe assets at rock bottom prices.