Spanish bailout is just weeks away…

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(ES) Spain region of Catalonia said to be asking for €5.023B, tapping liquidity facility – financial press

(ES) Spain offical: Valencia region needs over €3.5B from the regional fund- To negoiate aid amount within weeks – Needs to fund past years’ spending

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(ES) Spain Fin Min de Guindos:

  • Spain would only tap about €60B from a €100B banking rescue fund from the EU 
  • Confident that the ECB would take action in the secondary bond market to lower Spain’s borrowing costs
  • Spain would likely “give reassurance to the ECB” that it would continue with its fiscal consolidation effort
  • Whether Spain will request a new rescue package from the EU “is something that is totally open.”

(ES) 8/23 reports circulated that Spain would not be requesting aid before Sept 12 [date of German constitutional court decision] and is currently discussing technical details of terms for potential sovereign bailout. Earlier today, the EU Commission reiterated it has not received any request from Spain regarding a full bailout and no discussions for any other support for Spain are underway, but talks are ongoing at all levels on the response to the debt crisis.

How to interpret these headlines?

Following the news from yesterday on the Spanish Valencia region requesting aid from the federal government, Catalonia also decided to ask for aid today.  These new headlines add more pressure to Spain and the expectation for ECB to intervene is at all time high.  Of course, ECB has made it clear that no bond purchases before September 12, but I believe it is just a formality, as the decision has already made.

Spanish Bailout request will soon follow after September 12, especially considering the dire situation that Spain is in.  The key benefit being underlined here is ECB’s promise of bond purchases, which will address the core problem, high cost of borrowing.  I believe this will effectively calm the market, drive bond yields lower, thus help the overall contagion fear that stemmed from European crisis…  My view: Buy EURUSD ahead of Spanish Bailout.

 

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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

Comments

  1. Hi Henry,

    Can you please tell us when (date) we should trigger our EUR/USD trade and roughly at what levels?

    Regards,

    Gary.

    • Market has found support for EURUSD around the 1.2440 level, so that is the ideal entry; as far as timing is concerned, I would be looking at potential entries on the same week of the September 12 decision.

  2. In fact you should SELL EUR USD after the bailout, and buy on DIPS at this juncture.

    • So you think that EURUSD is going to go down after the bailout request? I think exactly the opposite. With ECB’s bond intervention, there should be no reason to be selling the Euro, so in my opinion it should just be buy, buy, and buy.

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