(EU) Separate US financial press report indicating Spain’s own bailout fund has only about €9B remaining. While it can be replenished through debt issuance, recent auctions have seen weak demand and sharply higher borrowing costs.
(EU) Follow Up 5:30 ET ECB: Have not been consulted on Spain recapitalization plans but is prepared to give advice on the development of such plans – Statement
(EU) European Commission may request that EU Fin Ministers allow Spain an extra year to achieve 3% deficit to GDP target, moving deadline from 2013 to 2014.
How to interpret this?
We saw sharp sell-offs of EURUSD immediately following ECB’s rejection, it seems that the market rather take a Spanish Bailout as a positive signal than a rejection of a Spanish Bailout Plan… Which once again brings us back to the basis of market analysis, that uncertainty is always worse than news, no matter how bad the news is.
I would expect to see EURUSD retest the 2011 lows of around the 1.2000 level, giving the fact that Greek election is coming up in a couple of weeks and Spain is under tremendous scrutiny, not mentioning the implication of requesting extention to the Deficit to GDP target… The key is to keep selling EUR whenever it makes significant recoveries.
ECB Rejects Spanish Bailout Plan
May 30, 2012 by 1 Comment