Euro Drops on ECB Bond Purchases Concerns

By TraderVox.com

Tradervox (Dublin) – The 17-nation currency dropped against most of the major currencies today as fears of ECB’s unwillingness to restart government bond purchases program were reignited. Klass Knot, who is a member of the ECB governing council, indicated that there was no justification why the bank should buy Spanish securities. These sentiments are against the market expectation that the ECB will restart bond buying instead of embarking on another program of bank loans. These concerns have come at a time when the sovereign debt crisis is worsening.

The Euro/dollar cross broke below uptrend support that has accompanied the pair for the last two months. The fears concerning Spain and other peripheral economies in the region has refused to leave the market and this is expected to push the cross below 1.30. Europe’s crisis is further compounded by the slowing down of Chinese economy which grew at a lower rate than it had been estimated. According to Vassili Serebriakov of Wells Fargo & Co. in New York, the market have resumed of fundamentals looking for economic growth in the region rather than the fiscal consolidation efforts that have been going on.

Wagers have placed their bets on the decline of the Euro against the dollar to the greatest level in five weeks. As such, the euro has declined against the dollar by $1.3078; it had gained 0.8 percent in last two trading days. The dollar fell by 0.1 percent over the last week. The 17-nation currency further declined against the yen by 0.8 percent to trade at 105.83 yen per euro. In the previous week, euro had lost 1 percent against the yen.

Euro’s current bearish trend was sparked by the Spanish bond auction disappointment and later the Italian auction soliciting sentiments that the ECB efforts are losing their effects. Sentiments from government and ECB officials have also foiled efforts to erase losses gained over the last week.

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