June 11, 2012
Looks like the weekend couldn’t come at a better time! After posting consistent gains throughout the week, the euro ended Friday on a sour note as it posted losses versus the dollar and the yen. But when I opened my charts earlier today, I saw the euro pairs gap up! What gives?
The major reason why the euro got rocked to end the week is because Fitch decided to slap not a one, not a two, but a THREE notch downgrade on Spanish debt. This put Spanish debt at the lowest possible investment grade status. It wasn’t too surprising though, as rumors of a Spanish bank bailout spooked the markets.
According to Fitch, the Spanish banking sector may need a recapitalization of 60 billion EUR and possibly as much as 100 billion EUR! Yikes! This is as much as THREE times the initial forecast of a 30 billion EUR bailout.
Oddly enough though, euro pairs have gapped up over the weekend, as news broke out that we would see an orderly Spanish bank bailout, even though they have asked for over 100 billion EUR. There is no word yet on whether the funds will be provided from the temporary EFSF or the permanent ESM. I’ll be sure to hook y’all up with more details as soon as possible.
As for economic data, the only report headed our way is French industrial production figures at 6:45 am GMT. Word is that production rose by 0.1%, which would be a decent improvement from the 0.9% decline we saw last month. Still, I don’t see this dictating euro trading for today. Instead, keep an eye out for those gaps and for more news about Spanish bailout woes. Good luck compadres!
"The only cable I watch is the pound baby."