FXstreet.com (Barcelona) – Now that July is well under way it feels as though the status in Europe has shifted from a zone of intervention, i.e. a scenario where things were getting bad enough that it was inevitable to act, towards a liquidity vacuum – where politicians and Central bankers have done all they are prepared to do for now.
Clearly more might be done over the coming months, however according to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “We are now in a worrying period where their interventions of the last month haven’t really reversed the negative trend in the areas of most concern – namely Spain and Italy.”
Spanish 10 year yields closed around 7% yesterday and apart from the two days they spent above this landmark in mid-June, this is the only time they have closed above this level since April 1997. “Its hard to see what naturally turns this round outside of a notable improvement in the data or a major policy shift – the latter being unlikely outside of a big summit.” they add. Overall rising Spanish yields and Chinese growth concerns probably have contributed to the market weakness yesterday.