EUR/USD: Euro Remains Under Pressure

Article by AlgosysFx Forex Trading Solutions

In yesterday’s European trading exchanges, the Euro lost to the US dollar after Spain presented its budget-reform program, a step that many analysts deem as initiatory before it decides to request for a full-blown bailout from its Euro Zone partners. The single currency also got a boost from the decline in Italian borrowing costs to 5.24 percent, from 5.82 percent at August 30’s auction. With doubts whether or not Spain would be able to control government spending because of Catalan’s demand for greater autonomy, the shared currency is seen to weaken versus the Greenback in today’s trades.

In its budget presentation yesterday, Spain announced a fresh round of budget cuts for 2013 that would enable the government to save 13 Billion Euros, with spending down by 7.3 percent. Madrid is said to be having talks with the European Union authorities about the terms of a potential bailout package that would give way for the European Central Bank to intervene and help lower its borrowing costs.

Despite the economic reforms about to be taken by the government, the region remains in trouble. Economic confidence in the currency union fell to the lowest level in three years, according to a survey conducted by the European Union’s Commission. Another challenge for Spain is Catalan, the most indebted region in Spain, as it calls for greater tax autonomy, which Rajoy already rejected. With growing pressure on Spain to seek for financial aid, the shared currency is likely to wane if the country continues to reject calls to request for a bailout. Thus, a sell bias is suggested for the EUR/USD in today’s European trades.

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