Germany continues to signal that it will look after its weaker EU brethren, a positive for the euro in certain respects but a negative in that the market is starting to lump the liabilities of the economically weaker members with those of Germany to the detriment of the Fatherland. Credit default swaps on German debt are widening as a result, now at a record 94 bp.
Combined with a resumption in risk aversion as US equities lose further ground after poor US existing home sales, the euro has come back under pressure, trading heavy at 1.2740. Support lies down at 1.2700/05. Interest to sell EUR/USD is rumored at the upcoming 16:00 GMT fixing.
