Euro Weakens As Spanish Bailout Uncertainty Aggravates Eurozone Debt Concern

Euro Weakens As Spanish Bailout Uncertainty Aggravates Eurozone Debt Concern


The Spanish bailout uncertainty kept the euro the weakest among majors today and the speculation over the legality of European Central Bank's recently announced bond buying program added fuel to the fire. The euro bear run continued as equities and high-yielding assets were down by lingering eurozone debt concerns.
Spain looks increasingly likely that it may seek a bailout for its economy and the nation's Prime Minister Mariano Rajoy is facing strong protests against austerity measures, which would be unveiled in his 2013 budget on Thursday.
German news paper Bild reported yesterday that Bundesbank may question the validity of ECB's OMT program and could bring the issue before the European Court of Justice citing it as a violation of the treaties for direct financing of state deficits.
Risk-aversion intensified after the Philadelphia Federal Reserve President Charles Plosser warned that the Fed's recently announced third round of quantitative easing is not likely to do much to benefit growth or employment.
Developments in Greece also caught the market attention after the Greek Finance Minister Yannis Stournaras said Greece would need an additional EUR 13-15 billion if the country were given a two-year extension of its bailout program.
Equities are down across the board on downbeat factors, with the German DAX falling 1.29 percent, the U.K.'s FTSE 100 slipping 1.02 percent and France's CAC 40 dropping 1.80 percent around 5:20 am ET.
Eurozone leading index rose 0.6 percent month-on-month in August to 105.3, the Conference Board said today. This was the first increase in the index in six months. The uptick followed no change in July and 0.2 percent fall in June.
The positive outcome was "fueled by good stock market performance and improved business confidence," said Jean-Claude Manini, the Conference Board's Senior Economist for Europe.
The coincident economic index, which measures current economic activity, increased 0.1 percent to 102.2 in August. The index was unchanged in July and decreased 0.1 percent in June.
The euro reached below the key 100-mark against the yen for the first time since September 13, falling as low as 99.73 by 4:15 am ET, down by 0.63 percent from yesterday's close of 100.37. The current downtrend may extend up to the 99.50 support level for the euro-yen pair.
Extending its 5-day losing streak, the common currency fell to a 2-week low of 1.2851 against the US dollar around 4:15 am ET. The next likely support for the euro-buck pair is seen around the 1.28 level.
The euro also lost ground against its Switzerland counterpart in early deals Wednesday, falling to a 6-day low of 1.2084 around 4:15 am ET. Further selling pressure could help the pair challenge the 1.2060 support level.
The European shared currency reached as low as 0.7951 against the pound before holding steady around 5:10 am ET. The common currency's recent downtrend versus the pound may continue in the near-term with the technicals signaling the eventuality of re-testing yesterday's multi-week low of 0.7939.
Looking ahead, the German consumer price index for September and the U.S. new home sales for August would garner the market attention in the North American session.