EU Morning Report - Uncertainty increases

The euro (EUR) has been weakening against most of its major counterparts, as there is increasing uncertainty concerning the European Stability Mechanism (ESM) and its use for the recapitalization needs of banks in eurozone’s indebted nations. Reports on Tuesday stated that it will only be used as a last resort, for new recapitalization cases. As Spain is due to release its budget today. Furthermore, by the end of the week the government will stress test the banks and subsequently will release its recapitalization requirements, where any detail concerning the mechanics of the nation’s bailout deal should be expected to affect the single currency.

§ The euro (EUR) broke through the 1.29 level versus the US dollar (USD) and a lower low was recorded at 1.2835 as expected. The downside prevails, given the increasingly negative market sentiment.

§ The US Tech (NDQ) did not find the catalyst needed to challenge its multi-year high at 2868.25, recorded last Wednesday and dropped from 2840.5 to 2805.

§ The British pound (GBP) dropped against the US dollar (USD), after it had been whipsawing for days just below the 1.6250 area, a major resistance level.

§ OIL has found support above the 90.00 area after plummeting over the past week against the US dollar. The commodity dropped from 100 dollars a barrel to 92, a staggering 8% depreciation.

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