News that Spain is taking immediate steps to whack an addition 1.4% GDP from its 2010/2011 budgets was greeted positively by the market but once again the euro ran into a brick wall of selling near the 1.2740 area.
The BIS reportedly remains on the offer at that level, suggesting one or more central banks is dumping EUR/USD that was likely bought earlier as a way to diversify away from the dollar. Central banks have not lost total confidence in the euro as reports of buying on dips continues.
While the Spanish spending cuts are welcome amidst a sovereign debt crisis there remain concerns that austerity across the southern tier of Europe will slow already sluggish economic growth in the euro zone, making deficit cutting that much more difficult.
Austerity and 20% unemployment rates are not compatible concepts in today’s world, but that is what we are left with…
1.2660 is next support for EUR/USD with small offers now at 1.2700. US trade figures are expected to show a $40 bln deficit for March; unlikely to have much impact.
