ING’s Chris Turner notes EUR/USD has slipped beneath 1.1500 as larger Greenback-denominated power prices damage most European corporates. He highlights restricted technical help till the 1.1390/1.1400 space and warns that widening peripheral eurozone spreads and monetary responses to excessive power costs may grow to be an even bigger story for Europe than for the USA.
Euro slides with widening spreads danger
“EUR/USD is simply breaking beneath 1.1500 in early Europe. European corporates with greenback receivables are welcoming the information, however for the overwhelming majority of European corporates, the upper greenback payables of power prices are painful. Under 1.1470, there’s little help till the 1.1390/1400 lows seen in early August final 12 months.”
“One other development that bears watching is the widening in peripheral eurozone sovereign spreads.”
“Low volatility and the seek for carry had seen the markets drive peripheral spreads to very slim ranges certainly earlier this 12 months – e.g. 50bp for 10-year Greece-Germany sovereign spreads.”
“The present widening most likely displays simply de-leveraging, however traders will now be monitoring authorities help measures to guard shoppers from larger power costs and what meaning for the fiscal outlook. Once more, that could possibly be an even bigger story for Europe than for the US.”
“EUR/USD may wrestle to make it again above 1.1500/1525 right this moment until there’s some clearly constructive information out of the Gulf.”
(This text was created with the assistance of an Synthetic Intelligence software and reviewed by an editor.)
