The markets worries about the European financial situation have accelerated containing the market sentiment punishing the single currency across the broad today falling from 1.23 with calm market trading yesterday because of the US markets closing after the ECB report warning about the long term debt refinancing which look in need of 800 billion euros by the end of 2012 suggesting that the European banks are in need to be ready for facing bad loans following the debt crisis which can reach 123 billion euros for 2010 and 2011 to reach 105 for 2011 and for facing the bad loans from 2007 till 2009 they should put be ready with 238 billion euros. The financing problems are still looking ahead from the ECB report showing a serious need for storing stability and injecting funds into the nerves of the European banks too as the European governments. There should be a clear mechanism from the ECB for facing this problem which threats the financial system and the economic growth which is actually struggling and exposed to further downward pressure from expected tightening steps from the governments for capping their deficits which should effect on the demand which moves the growth up.

It is not just facing the problem of conducting the suitable monetary policy of the Euro for the European countries which are in safe from the debt crisis facing just negatively impact of it like Germany, France and Italy and the countries which are facing actually unsustainable debt position risks and in need of supporting like Greece, Portugal and Spain right now, it is also a lack of liquidity and crediting problems which effecting negatively on the investing sentiment with the current low growth rates of the economy which can be exposed to recession again and the single currency which is subjected to fall further in the short term. The market was waiting for further details about the ECB plans of buying bonds after the announcement about reached agreement with the IMF to provide 750 billion euros in a rescue package plan under the request of the European countries which are facing debt problems opening the door for the ECB to start discussing and buying European bonds by the volume which it sees suitable and suddenly, it has this new chock of facing a great deal numbers of bad loans and further sack of liquidity which can push the interabanking key interest up further in the Euro zone.

God Willing, it is important to wait today from US for May ISM Manufacturing index which is expected to be 59.6 from 60.4and later this week for US ISM non-manufacturing index of May to be 56.2 from 55.4 in April and ADP employment change of May to be 59k from 32k in April and by the end of the week May Labor report of US which is expected to show increasing of the non-farm payroll of by 500k from 290k in April and declining of the unemployment rate to 9.8% from 9.9% in April.

Best wishes

FX Consultant Walid Salah El Din E-Mail: