Market Concerns Re-Intensify on Greece and Spain

EUR/USD Fundamental Analysis

The Euro is presumed to weaken opposite the US dollar today on heightened market jitters as Greece’s coalition government will face key tests this week in efforts to secure a portion of a bailout loan by creditors that will avert a potential bankruptcy. Meanwhile, fresh economic figures are deemed to underscore the crippling effects of the debt crisis on Euro bloc.

The Greek government is awaited to present a new austerity package to Parliament today which must secure deputies’ approval if the country is to secure more financial aid and stave off bankruptcy. Braced for a week of strikes and public protests in a show of public anger, Parliament is anticipated to vote on Prime Minister Antonis Samaras’ package of 13.5 Billion Euros in cost cuts and tax hikes along with measures making it easier for firms to hire and slash workers on Wednesday. Approval of the reforms and the passage of the 2013 budget are critical to secure the 31.5 Billion Euro bailout tranche from its troika of lenders. In a speech aimed at uniting the members of his New Democracy party, Samaras expressed that such cuts in wages and pensions are needed to avert the nation’s exit from the Euro.

In response, powerful prominent public and private sector unions will launch a 48-hour strike against the legislation on Tuesday and plan marches in Athens’ city-center. Professionals including journalists, doctors and transport workers are also planning stoppages. The protests will ratchet up pressure on coalition deputies whose parties have plunged in opinion polls. On continuing concerns that Greece will struggle to secure a bailout, the single currency is believed to dip.

Meanwhile in Spain, economic conditions continue to deteriorate by the day. The Spanish Employment Ministry reported that the number of unemployed individuals jumped in October by 128,200, well surpassing September’s figure of 79,600, as a deepening recession and austerity measures took further toll on the economy. Last October 26, the National Statistics Institute said that unemployment in the country climbed to a record high 25.02 percent in the third quarter compared to 24.6 percent in Q2. Spain holds the second highest jobless rate in the European Union after Greece, and Spain is still continuing to ignore market pressure to request for more aid. Considering such environment, investor sentiment in the Euro area remains rather bleak on debilitated growth prospects. Despite a marginal improvement, the Sentix Investor Confidence is projected to come in at -20.7 points in November from -22.2 points in October. With investor confidence still down, lower economic prospects are likely to weigh further on the common currency. Hence, a short position is advised for the EUR/USD today.

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