A thinktank report is circulating saying the ECB will embark on large-scale Spanish bond market intervention once the request for EFSF aid is made.
To me, there is nothing new there. Officials at the EU and ECB have been hinting at this for some time. I wrote about it on Tuesday, saying that Spain likely wants a detailed plan in place before it makes the request.
When the request comes, I expect it to be package with announced reforms and action from the ECB. It will be a big, coordinated move designed to smash bond market shorts. The euro will surge on the announcement as well. After the squeeze,which could last days or a few weeks, the euro will start to fall again.
EUR/USD last at 1.2336. Offers around yesterday’s high of 1.2345 followed by more at 1.2380/00.
