Spain Confuses Market by Waiting for Bailout Request

October 3, 2012 Share Print 3

Spanish Prime Minister Mariano Rajoy denies allegations that Spain will make an official request for a bailout this weekend. The issue of a bailout package for Spain has been an WHEN not an IF matter for a couple of months now.

After clearing all the member state hurdles last month, October should be the month when the official aid request is submitted. There is no real dependency between the member states approving the ESM and the bailout request, but it seems Spain will not move until its sure the Troika does not have an excuse to withold funds.

There is also rumors circulating about Germany being the force behind the bailout request delay. And by Germany they probably mean the Merkel goverment who wants to grant the aid, but will prefer if its a last minute â€œhad to be doneâ€ affair to avoid political fallout.

Another side effect of waiting for a bailout is that the unceirtainty in Spain has made more companies move their assets abroad, which will make it harder for the country to meet its austerity measures objectives and deficit targets in the coming years.

OANDA Forex Heatmap

The currency market is waiting for Fridayâ€™s U.S. Non-farm payroll report. The private sector ADP figures set up a positive expectation after 162,000 jobs were created. This figure was better than expected. The vast majority of the jobs addes came from small and medium sized business. Large companies only accounted for 10 percent of jobs created.

ADP Emploment Report September 2012

To download the full ADP Employment report click here

With two job reports before the presidential election they take on an additional meaning. The only non factor would be if they come in as expected, which would indicate stagnant growth.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.