By TraderVox.com
Tradervox (Dublin) – Euro has dropped from yesterday’s close prior to Italian Government debt auction this week. The decline also came as the market awaits a report from the region expected to show that industrial production for the euro area dropped to a seven-month low. The situation in Europe is also compounded by the pending election in Greece which is expected to shape the future of the single currency bloc. The euro dropped against most of the currency majors as eurozone debt crisis spreads.
Signs of contagion have already been seen with Spain becoming the fourth country in the region to request international bailout. In the meantime, Spain’s borrowing cost has climbed to 15 year high which has led to Fitch Rating Company to predict that the country will miss its budget deficit targets. Such sentiments have spurred the demand for safe haven currencies causing the euro to drop against the dollar and the pound. However, the euro climbed against the yen as the market awaits decision from the BOJ meeting starting tomorrow. With concerns about Greece still ripe, Spain and Italy have continued to change the market with benchmark bond-yield climbing close to levels that have sent Greece into recession.
Italy is planning to sell $8.1 billion one-year bills and offer bonds maturing in 2015, 2019, and 2020 tomorrow. The country’s ten-year government bond climbed to as high as 6.3 percent yesterday just 0.7 percent short of the levels that led to Greece, Portugal, and Ireland asking to international bailout. Spain’s 10-year bonds have climbed to 6.83 percent the highest since 1997. Such signs are indications that the region’s debt crisis continues to capture more countries as it get to its third year. Another report from the European Union’s Statistics office is expected to show that industrial production in the euro region dropped by 1.2 percent in April.
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