Forex: EUR up as investors hope for Spanish aid with 'no strings attached'

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Category: Exchange Rates

Published on Monday, 06 August 2012 08:57

Written by Will Peters

The euro has squeezed higher on the forex markets this morning as markets continue with Friday's positive theme.

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Good job numbers out of the US combined with a positive Asian session have seen the European currency maintain recent gains.

"The euro could continue to edge higher near term, purely on the chance that Spain applies for an aid package with no further strings attached," says a morning currency note from UBS.

In response to a question as to whether Spain will apply for EU aid, Spanish Prime Minister Rajoy asserted that "I will do, as I always do, what I believe to be in the best interest of the Spanish people. You cannot be head of a government and think about anything else".


Rajoy linked any decision to Draghi’s latest plan, saying "what I want to know is what these measures are, what they mean and whether they are appropriate and, in light of the circumstances, we will make a decision, but I have still not taken any decision".

Rajoy also stressed "the Eurozone cannot accept, if we are truly talking about a project, a joint project for millions of citizens, that there should be such wide differences in financing between one member state and another".

Elsewhere, the troika’s team concluded their Greece visit on Sunday.

In a jointly issued statement, the team noted that the discussions with the Greek authorities were “productive” and that an overall agreement was reached on the “need to
strengthen policy efforts” to achieve the objectives of the economic adjustment programme. The team expects to return to Athens in early September to continue the discussions.

The Spanish services PMI for July came in at 43.7, slightly better than the 43.0 consensus and 43.4 June actual, while the corresponding figure for Italy softened to 43.0 from 43.1 in June. The French services PMI was revised to 50.0 from the 50.2 preliminary estimate, up from 47.9 in June.

The revised German services PMI was 50.3, ahead of the 49.7 preliminary figure and the 49.9 print in June. All told, this fed into an upward revision in the Eurozone figure to 47.9 from 47.6, a modest improvement on the 47.1 result in June.

Overnight ECB’s Coeure said that the ECB could even consider more targeted liquidity operations targeting small firms and households. This would be additional credit easing on top of the headline measures already announced.

ECB Governing Council Member Visco also said the market should ‘expect more expansive ECB’ in the next months, according to La Repubblica.