Pain in Spain fuels fears in Europe

Currencies Direct April 30th 2012 - < 1 minute read

Fears in Europe have escalated a notch amid growing concern on both economic data and political cohesion.

This morning (30 April), S&P have rated 16 Spanish banks negatively. Press reports out of Germany suggest that a Merkel-Hollande alliance will not be as straightforward as the Merkozy alliance. At the moment the euro is holding up fairly well as the market has been selling the US dollar on sentiment that the Federal Reserve will ease further, however the underlying negative tone will be a concern to the markets.   

Later this week the European Central Bank is expected to leave interest rates on hold, but Mario Draghi will face tough questions in the press conference on the strategy for Europe amid growing concerns for a growth compact. 

US jobs data will be a main data point to watch this week. Friday’s non-farm payroll report will form important sentiment for the pace of the US recovery after last month’s disappointing number, which followed a good run of jobs data. The number is expected to be a good one, and the feedback on it will be a key factor for the Fed's future strategy – if the number's bad, we can expect more easing. 

In the UK, attention will focus on tomorrow's PMI data which will offer a snippet of growth feedback following last week’s preliminary Q1 GDP (which came in negative). Again, if data proves negative it could trip the Bank of England to pump more QE through the system possibly at the May Monetary Policy Committee meeting.

Elsewhere, we have an expected rate cut from the Reserve Bank of Australia tomorrow which could weigh on the Aussie dollar.

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