The pressure is still on the single currency on increasing European requests for Portugal to accept a funding loan of its deficit from the IMF and European commission prepared package for the debt problems of the Euro area following Ireland while they have new assurance from Spain that it is not in need of this package satisfied with the current bond market conditions and how it was obvious to the market that the Irish yields have gone down as it has become less exposed to the normal bond market conditions which have become sever to its financial position, after the announcement about its reached deal for having funds from this package as it has restored the confidence on the offered debts giving stability of its position supporting the position of the other European countries after the yield differential have increased recording new highs between the suffering countries like Ireland and Germany as the most stable trusted country and first funding county of this offered package and looking for having adjustments of the bond market inside the Euro zone as what has been announced with France by the end of last week.
The market sees stability currently in this Bond market than a week ago eyeing on the Portugal right now for accepting it's waited share of this offered low interest rate loan bringing its deficit to GDP below 3% as Maastricht treaty pact getting the market focusing out of this debt problems from now without further worries at least for the meanwhile and the short term and working with the other European market for restoring confidence in the European debt and the Euro creditability which has influenced negatively this year by the market worries about the debt outlook inside the Euro and the probabilities of execrating and spreading out of the ailing countries like Ireland and Greece to other countries has actually suffered from the impact of it like Italy, France and Germany. So, if we had a similar acceptance in the coming few weeks from Portugal, this can be good for the Euro over the short and medium term putting the markets eyes on the economic growth rates which can help these suffering economies from deficit to get its financial situations stable out of defaulting risks which tempered the investments spending tackling the recovery of these countries after the credit crisis joining the other European countries as we have seen recently the germane IFO historical recorded new high of November which has not been seen since the beginning of it in 1991 reaching 109.3 getting above October reading which was 107.7 but even this good figure was not enough to ease the market worries about the debt outlook inside the Euro area which is still looking in needs of an end or new reasons to get down and this can be by the acceptance of Portugal or what can it give to restore confidence about its debt too like what Spanish government which has announced that it has no reason to get use of this offered helping package.
The European equities markets have mostly closed it last session down working lonely without the US markets which were closed because of the thanksgiving holidays negatively impacted by the low volume and some restored confidence in the bonds markets driving them up after the yields of them got down last week by the Irish acceptance but the germane market which closed the week up by just 5 points with no realized changes on its bonds prices which were actually stable and the differentials amongst its yields and the other suffering European economies from the debt crisis were gauge of the crisis depression of these countries which continued pressing on the single currency trading below 1.32 last Friday before closing the week at 1.3247 versus the greenback after failing to get above 1.3775 in the beginning of last week despite the market concerns about Ireland have calmed down on a reached deal between IMF, EU and Ireland during for having a bailing out package from 80B Euros to what's below 100B Euros as the Irish government has announced but this inability for keeping this gains has put technical pressure on the pair which has drawn down breaking 1.35 psychological level triggering stop losing orders adding to the downward momentum of the pair which has its real major supporting area starting from 1.3030 to 1.297 and the failing to have new buying there can lead to testing the pair recent bottom at 1.26 while the greenback has been supported by revising up of US Q3 GDP to 2.5% from just 2% but this could not improve the market risk appetite which has been affected negatively by the triggered fire between the 2 Koreans which killed 2 south Korean soldiers and unknown damage yet on the northern Korean part which lead to a risk aversion sentiment containing the markets sentiment supporting the greenback across the broad from another side underpinned by the demand for the US treasuries from looking for a safe haven in the USD dominations and the gold also which is still trying for getting above 1380$ but after the EU finance ministers passing of 85B euros bailing out package plan during this weekend, the single currency can get some relative strength in the Asian session but this can not hold as long as the market concerns are still existing with the tension in the semi Korean island capping the investors from taking risk back after squaring before the thanksgiving holidays in US preferring the greenback and the gold holding.
God willing, the markets will be waiting this week from US for November ISM Manufacturing to be 56.3 from 56.9 in October and non-manufacturing indexes to be 54.7 from 54.3 in October and also by the end of the week for US non farm payroll to be 145k from 151k in October and the US factory orders of October to get down by .7% after rising in September by 2.1%
Best wishes
FX Consultant
Walid Salah El Din
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