Mike Paterson’s daily Forex brief
The past 24 hours has since another round of USD buying as concerns increase over the state of European banks after the latest weekly statement published by the ECB.
The report shows that tens of billions of â‚¬ funding support for European banks appears to have shifted to the ELA (Emergency Lending Assistance) programme of the ECB from the LTRO (Long-Term Refinancing Operations), an indication that some European banks may be in dire financial straits.
Spanish banks accounted for 27% of all ECB funding. If one or more of the Spanish banks were considered financially unsound or were short of eligible collateral that could explain the growth of the ELA and the shrinking of the LTRO.
Either way, Spanish government debt yields have risen and the spread versus German 10 year bonds continues to widen, currently to 523 basis points. EURUSD has been slapped through the strong 1.2500 support line and another large barrier option interest at 1.2450 has been broken this morning. I have been warning that although there were a few buyers around the rallies were getting weaker and weaker as more natural sellers emerge.
GBPUSD has also been hit down through 1.5600 to lows of 1.5562 thus far as once again traders favour the US Dollar in the Best of a Bad Bunch Awards, with Gold also being hit, currently down at $1547.
The Pound overall continues to trade sideways but interestingly EURGBP has not had the drop that some were expecting on the back of these latest Eurozone banking concerns. This suggests of course, as I’ve been saying for ages, that the markets are starting to understand the impact on the UK if matters worsen, which seems inevitable.
UK lending data just out is slightly better than expected but traders are unimpressed. Not much else out today but ECB President Draghi speaks this afternoon on top of all the other rounds of rhetoric we’ve come to expect from EU principals.
I don’t see a change to this current sentiment anytime soon, although I’m happy to hear your arguments to the contrary.
Talking of which my comments yesterday on the saturation coverage of the Olympic torch relay produced more reaction from you than any other topic in recent memory. Thus proving that as we continue in global meltdown mode, it’s obviously the little things that matter most!
Stay safe out there, as indeed Uncle Roy seems to be doing judging by his final England football squad numbers submitted yesterday….. Yawn…….
Interbank Rates 07:17 BST
Today’s Data: BST
09.30-UK- Net Lending to individuals / Mortgage Approvals / M3 Money Supply
15.00-US- Pending Home Sales
16.30-EU- ECB President Draghi speaks
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