EUR Trading Outlook (28-11-2011)
The euro edged lower on Friday in thin holiday trade after a weak Italian bond auction. Italian government bond yields soared to euro-era highs climbing above 8%. Investors fear about the country’s ability to raise funds from the market at affordable rates and the consequences of a potential shutdown in the Italian bond market. The European Central Bank intervened in the bond market on Friday buying Italian and Spanish debt but it appears that the central bank’s action is no longer sufficient to stop a wave of selling. Rating agency Standard and Poor’s downgraded Belgium by one notch to AA citing a slowing economy and political instability. On Monday, the euro rebounded after an Italian Newspaper said the International Monetary Fund was preparing an aid package for Italy in case the situation worsens but the IMF denied such discussion. Against the dollar, the single currency fell as low as 1.3212 but later it rebounded to trade at 1.3342.
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