The U.S. dollar remained lower against its major counterparts and trade was quiet as some European countries and the US (Memorial Day) were on holiday yesterday. On the overhand, safe haven demand seemed set to remain, as concerns over rising Spanish borrowing costs weighed on investor sentiment, which is what we expected to be the case.
With no fundamental figures for UK, Eurozone or US yesterday, investor’s eyes were focused on Spain, with the yield on Spain’s 10-year bond rising to 6.47% (the highest this year and a level considered unsustainable in the long run) after closing at 6.34% on Friday.
Investors are judging Spain's debt as the riskiest it has been as fears grow over the health of the country's banking sector. The Spanish prime minister admitted yesterday that the situation in Spain was "extremely difficult" and as a result the Pound made some ground against the Euro in the afternoon.
Fears over the possibility of a Greek exit from the Eurozone subsided after weekend opinion polls showed increasing support for pro-bailout party New Democracy ahead of elections which are due to be held on 17th June .
Looking ahead today there is only one fundamental figure that could potentially move markets, as German Consumer Price Index remaining the same would bring short-term Euro stability. Spain’s issues could however out-weigh this and we could see the Euro struggle against the Pound.
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