Kathleen Brooks of Forex.com is concerned that the tremors in the periphery are now being felt in the core, noting: “France and Belgium have seen their spreads versus German bonds come under pressure in line with the peripheral nations.” Similarly, Philip Poole, global head of macro and investment strategy at HSBC, in his latest New World Insights note states: “Unfortunately, leverage in the government sector is not a problem that is limited to the periphery of the Eurozone.”
Angus Campbell of London Capital Group thinks if the issue over who will bear the cost of any haircuts isn’t sorted, the euro will remain under pressure in the coming weeks. He says until this is resolved “further upside to the euro looks limited and volatility will likely remain high.” Louise Cooper of BGC Partners says “markets are getting impatient.” Many are touting tomorrow’s crisis meeting as another judgement day, but Cooper is “highly sceptical that a one day summit is going to fix this problem,” calling the problem a “crisis by committee.”
BRUSSELS WE HAVE A PROBLEM
According to Andrew Morris, managing director of Signature, there is no easy solution to the Eurozone crisis. He explains “there are 17 different countries, each pursuing their own agenda, with their own interests and their own domestic politics.” This is compounded by disagreements between the intra governmental institutions. He concludes: “Current efforts have failed because they don’t acknowledge the nub of the problem, which is one of solvency.”
Campbell says over the near-term, a key resistance level will be seen at €1.4285 and support at €1.4025 and €1.3950 over the longer-term. He thinks bulls will be targeting resistance at €1.4700 and €1.4900. However, being a euro bull right now might be a symptom of mad cow disease.