Markets have attempted to take a more positive attitude towards risk which underpinned the Euro, but the Euro-zone structural fears have remained an extremely important underlying feature. Yield spreads within the Euro area have widened again on Wednesday as underlying confidence remains weak and these internal stresses will remain a very important negative factor for the Euro which will limit the scope for a Euro recovery. The dollar will still find it difficult to gain strong, independent support given that the US still faces very important vulnerabilities with a suspicion of a renewed downturn. Overall, the Euro is likely to hit further selling pressure above 1.2340 against the dollar even if near-term selling pressure is contained.
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