By FX Empire.com
It was another really bad day for the EUR/USD as the pair returned strongly to its bearish run amid mounting debt woes and fears of contagion that seemingly now affected Germany!
The fear of surging yields and record borrowing costs continues to alarm the market and keep the focus on the debt-laden euro nations. French and Belgian borrowing costs surged after newspapers said they are in talks with Dexia again to go over its rescue signaling alarming messages to markets that France might end in shouldering more putting its already fragile state at risk.
The news continued with Fitch issuing a new warning for France after Moody’s that at this worsening rate and slowdown it might lose its top credit rating. The worries coupled with downbeat macroeconomic figures with the contraction in the manufacturing and services sector ongoing in the euro area that assures the weak outlook for the area.
Nevertheless, the biggest strain for the day was the unexpected abysmal outcome of the German 10-year bond auction as it missed 6.0 billion target and the Bundes bank had to step in and purchase almost the half of the sale as investors shunned the bond of fears over Germany’s outlook to shoulder more as recession looms and the debt crisis deepens with low yields that was not tempting risk-reward ratio to investors!
Surely the debt crisis is the main driver for the sentiment and the good news are not doing anything to help in ending the selloff! The IMF expanded the precautionary lines lending up to 6 months for nations that are under distress from the current crisis and that are healthy to prevent the contagion yet still it did little to nothing for the market. The EC also proposed changes to monitor the euro zone members budgets in line with the demands from Germany and France yet that is also another precautionary move that is not at all what the market needs now as they need a solution which no one is offering!
We still see the market will continue to battle its demons on Thursday and with our expectations for lower trading volumes due to the U.S. holiday more volatility might be evident especially with Europe queued to release more important macroeconomic data.
Germany will start the session at 06:00 GMT with the GDP figures for the third quarter in a final reading, where the seasonally adjusted quarterly GDP is expected unchanged at 0.5%, while the working-day adjusted GDP index is expected at 2.6%. In addition, the domestic demand index for the third quarter is expected unchanged at 0.4%, while exports are expected to expand by 1.7% from 2.3%.
At 09:00 GMTGermanywill release the IFO survey for November, where the business climate indicator could have retreated to 105.2 from 106.4, while the current assessment indicator could have declined to 115.2 from 116.7, in the time expectations indicator could ease to 96.0 from 97.0.
The United States (Thanks Giving Holiday).
Originally posted here
