Certainly there were plenty of reasons why the euro should have fallen in European and US trade, and the single currency did exactly that, sinking to a session low of 1.3058.
However, once again the buyers saw value in EUR/USD, pushing the pair back above 1.31. The Bank of Spain announced that non-performing loans as a percentage of total lending hit 8.2% in February from 7.91% in January, effectively a 17 year high! It was therefore not a surprise to see the Spanish IBEX fall 4% on the day.
Italian Prime Minister Mario Monti also helped lower sentiment by saying (perhaps predictably, given the UK Telegraph had written about it during the previous session) that Italy will not be able to balance the budget with a shortfall of 0.5% of GDP this year. Mr Monti also downgraded the country’s growth forecast this year to see predictions of a 1.2% contraction from a 0.5% contraction announced back in December.
Price action in EUR/USD will be dictated to by US data tonight, where we get to see US jobless claims, the Philli Fed manufacturing index and leading indicators; however, keep an eye on the results of the Spanish two- and ten-year auction, which has the premise to inspire confidence if all goes to plan. The Spanish debt agency are looking to issue up to €2.5 billion in both maturities, so it’s not a huge amount of money; keep an eye on the bid to cover ratio, anything above 2x is considered a good auction.