Yesterday, Eurozone finance ministers approved a €85 bn financial rescue package for Ireland, although €17.5bn of this will come from Ireland’s sovereign wealth fund and other domestic cash resources. The remaining cash is to be sourced from the EFSM (€22.5 bn), the IMF (€22.5 bn), and the EFSF and bilateral loans (€22.5 bn).The cash is to be put to several uses: €10 bn has been earmarked for an immediate recapitalization of the banks, with a further €25 bn available as a contingency. The remaining €50bn is to be used to meet the funding needs of the State.
Of important note, EU Commissioner Rehn said that holders of senior bonds in Irish banks will not suffer a ‘haircut’ as part of the rescue effort.
This news should give a temporary respite to the EURO, but it will certainly continue to trade with a heavy tone on concerns for Portugal and eventually Spain.
Since the announcement, EURUSD traded up to 1.3354 overnight and back down to 1.3182 to open in Europe around 1.3240 as I write.
In terms of levels, 1.3155-75 area should find some supports and 1.3350-75, followed by the 1.3400-20 level should be the area of resistance.
At the moment, I would be more enclined to sell a rally in the area I just mentioned, but let's see how the european FX and bond markets interpret the news.
Have a good day,
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