The European common currency surrendered some of the gains recorded against the U.S. dollar and other major after the mixed auctions from Spain and Netherlands, where yields on Spanish short-term bonds reflected significant tension in the debt market; however, Netherlands was able to run a successful bond auction despite the collapse of the government earlier today.
Spain sold around 2 billion euros of bonds maturing after three and six months, where yields on those bonds rose from a previous sale in March reflecting the heavy pressures seen in the debt market, where despite the several attempts from Spain to boost growth and cut the deficit, investors still doubt the nation's ability of meeting targets, especially after the nation missed the targets set for 2011.
The Spanish treasury sold as much as 1.93 billion euros, around the maximum target of 2 billion euros. Borrowing cost rose to 0.634% from 0.381% on the three-month bills, while on the 6-month bills yields rose to 1.58% from 0.84%. Demand rose on the three-month bills to 7.6 times the quantity offered from a previous of 3.5 times, while demand on the six-month bills retreated to 3.3 times from 5.6 times the quantity offered.
The Dutch Prime Minister, Mark Rutte, alongside with his cabinet stepped down today after the split over the budget cuts demanded by the European Union, where Netherlands should rearrange its financial position in order to avoid losing its triple-A credit rating.
However, the Dutch Treasury was able to sell bonds in the targeted range as yields almost remained steady on the longer-term bonds, while borrowing costs fell on the 2-year bonds, easing jitters after markets were stressed, awaiting the bonds sale with speculation borrowing cost might rise after Moody's considered the government collapse a credit-negative.
The rating agency Moody's considered the collapse of the government as a credit-negative. However, the rating agency maintained the triple-A rating of Netherlands will stable outlook, but warned that a weakening commitment to fiscal discipline might trigger changes to the current debt ranking.
The EUR/USD pair opened the session today $1.3155 and recorded so far the highest at $1.3183 and the lowest at $1.3144, and is currently hovering around $1.3167.
The sterling pound was able to extend the gains for the seventh consecutive month despite the widening government debt, where data released today showed that the public sector net borrowing surged again in March beyond expectation, raising fears the austerity taken by Osborne may not be sufficient to curb the increase in the national debt.
The GBP/USD lost momentum after the news, yet was able to hold onto some of the gains recorded, where the pair is trading in the moment around $1.6143 after reaching a high of $1.6158 and a low of $1.6109, noting that the pair started the session at $1.6129 today.