EUR/USD has experienced a significant weakening in the area yesterday, it was reinforced by fears of market participants to the conditions prevailing in Spain.
Current headlines are important; however are adding substantially to the general noise. What is important for EUR is:
1) The ECB has Decreased tail risk of an EMU breakup through the OMT,
2) Europe has Decreased the tail risk of a banking sector collapse through progress towards a banking union;
3) the key drivers in the near-term are central bank policy and the growth outlook. We have updated our EUR forecast to reflect this; increasing our targets for Q412 to 1:26 and leaving our targets for Q413 unchanged at 1:21 The next major event is the ECB on October 4th; however today's expected Spanish update from Moody's as well as the release of the Spanish bank stress tests could provide a knee-jerk reaction in EUR.
So the real crucial area is go round in early trade at the beginning of the month of October which was also initiated last quarter of this year. Many things that would make the road a bit bumpy at the beginning of this week, so ... traders ... let us count the risks we have :)
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