The market is still focused on the developments in the debt-laden euro area. The tension in Italy is overshadowing the market, where the promise from Berlusconi to resign is still not the magic pill needed as the strain sent the yields on Italian bonds above the risk limit of 7.0% the alarm that sent Greece, Portugal and Ireland to seek help.
Jitters and tension are evident and investors are dumping risky assets and seeking haven demand with the dollar on the rise and German bunds moving higher as the safer bet to bubbling troubles in Europe. Gold is stabilizing and resisting the dollar's gains and nervous trade printed heavy losses across European markets with stocks trading deep in the red.
The EUR/USD remains under evident bearish pressure with investors betting on the worse outcome and the lingering crisis in Europe. Berlusconi said he will resign once the measures needed to pass and the budget amendments are secured in parliament; he still has a second leg of voting to survive which might be rushed soon to ease the market strain.
The pair suffered heavy losses reaching a low of $1.3645 from early trading as high as $1.3858 and now trading down nearly 1.4% at $1.3639.
Greenback surely traded positively on the risk aversion and evident political tension in Greece and Italy, especially as the former did not announce the final government that will foresee the passage of the bailout, further assuring that Europe is stalling and that will only intensify the problem and pressure Italy into the debt-trap! The USDIX is currently trading bullishly at 77.51 higher by 1.10% striking the high of 77.56 and the low of 76.51.
Rising Italian yields are merely a reflecting of insecure markets that do not see Italy out of the woods, and with the uncertainty over its political future some see that it will still suffer to activate and foresee the needed reforms that it has been carelessly dodging for the past decade.
The 10-year Italian bond yield surged to above 7.0% further pressured by LCH.Clearnet's decision to raise the margin requirements for trading Italian debt and that only extended the agony for markets.
Stocks are trading sharply lower on the surging yields and slumping euro, as the sentiment is clearly shaky and negative. The euro area's STOXX 50 gauge is down 2.44% at this time at 2246.73 and the broader STOXX 600 is down by 1.73% at 236.34.