Week in FX Europe – EUR unfazed by Greek Debt and Budget Failure

The EUR defied all odds this week. With very high profile meetings of European leaders reaching no conclusions and EU manufacturing near 2009 lows it was hard to expect the EUR would be in the 1.2950–60 range. Chinese manufacturing expansion and the US holiday created a market where the EUR reached 3 week highs.

European politicians reached no accords, but made sure all talks will resume somewhere in the near future. There were no fallouts and no compromises which is what we have come to expect from these types of meetings. Economic indicators painted a different picture. Manufacturing continues to suffer in the UK and Europe. Business confidence continues to erode even in Germany the zone’s strongest economy.

France was warned that its AAA rating will be under review next year by Fitch. The France based rating agency is the only one giving it the highest investment grade as Moody’s and S&P downgraded the country earlier in the year.

Spain’s bond sale this week was a boost of confidence for the EUR as the yield on the bonds was 5.5% much lower than the precious 7 percent that was seen in July.

Greece continues to be the centre of debate as factions of Euro members are split on the way to help Greece without taking a haircut or extending the deadline. The IMF has recommended that Greek debt should be about 120% of GDP and a sustainable timeline to repay the debt would be 2022.

• Europe Close to Weakest Quarter since 2009
• Poland Criticizes European Response to Crisis
• EU to dip into European Financial Stability Fund to Reach Greek Compromise
• Spain 3.9 billion EUR bond sale is successful
• Germany refuse “illegal” cuts on bilateral loans to Greece
• Greek PM Eurozone Stability at Stake
• Angela Merkel Believes Greek Solution Monday
• Spanish Bad Loans rose to 10.7 percent of Bank Portfolios
• Finance Chiefs Meet to Discuss Greek’s EUR32.6 billion Gap
• EUR / USD – A Little Resurgence Towards 1.29
• EZ expected to reach deal on Greek aid
• Eurozone Manufacturing Output Contracts
• France AAA Rating Under Review

• UK Manufacturing Continued Contraction Forecasted
• UK Fails to Reach Deficit Reduction Targets
• Bank of England Minutes Show Split on QE

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