Daily Report: Risk Aversion Back as Markets Reassess Spanish Bailout, Concerns of Greece and Cyrus Weigh

Markets are back into risk averse mode as Spain's banking bailout was reassessed by investors after risk rally. Fitch also downgraded two of Spain's biggest banks as economic outlook worsened. Cyprus, another Eurozone country, hinted yesterday that it may need to apply for an international by month end. Reuters reported that Eurozone officials have discussed the possibility of imposing capital control on Greece exit. All the negative news sent US stocks lower overnight and dragged Asian equities into negative territories. EUR/USD is back trading below 1.25 for the moment while yen is back below 100. The weekly gap open in EUR/USD now look more like a bull trap than anything.

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Spain To Be The Fourth Country To Ask For Bailout

Over the weekend, the Spanish Finance Minister Luis de Guindos announced that the country would request financial assistance from the EU for recapitalization of the Spanish banking system. While the final amount would be released after the results of 2 independent audits due June 21, the sum is estimated to be 100B euro, covering estimated capital requirements and additional safety margin. Both the EU and the IMF welcomed the request. For investors, the move is expected to lift market sentiment in the near-term. However, it does not resolve the long-term problem in the peripheral European economies that is the lack of growth prospect without which the 17-nation bloc would find it impossible to get out of the crisis.

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Source : actionforex.com