Recovery Against The Major Forex Is Underway

The single European currency resumed Thursday afternoon after recent days against the backdrop of Italian sovereign crisis. Around 12:30, the euro and gained 0.44% against the USD to 1.3584, after bottoming at 1.3484 this morning. It was the first time in a month that the currency drove the dollar threshold of 1.35 euro.

A recovery is also observed against the pound sterling (+ 0.31% to 0.8530). However, the calm side of the yen (- 0.01% to 105.4) and the Swiss franc (- 0.07% to 1.2304).

Some relaxation has occurred in the last 24 hours on the interest rates of Italian state funds to 10 years, income to 7% after a 7.5% pric close yesterday afternoon. Which indicates an attenuation of concern about the situation of sovereign countries.

‘The President of the Italian Senate announced that he would ask senators to pass the law on financial stability by the end of the week to reassure the markets’ traders refer to Pictet & Cie. This law should be passed by the lower house by the end of the month, then the current Chairman Silvio Berlusconi, denied an absolute majority, should resign, according to the current schema.

“With 1,600 billion euros, the Italian debt surpasses that of Spain, Portugal and Ireland combined” recalls Fabrice Cousté, CEO of CMC Markets France. Or also, “the country needs to refinance 37 billion euros until the end of the year and 307 billion euros in 2012. With an average cost to 4.15% of its existing debt, the interest alone already amounted to 12.7 billion. With a rate of 7%, the debt burden becomes heavier 8.7 billion, “he calculates

According to CMC Markets France, the European Central Bank is only able to contain the fire. The establishment of Frankfurt could increase the pace of its purchases of Italian bonds, which are not unanimously this summer and were conducted at a rate of 7 billion euros a week.

“It will be the first step towards a debt monetization European situation so far always refused categorically by Jean-Claude Trichet and Germany,” says Fabrice Cousté. “The sooner the better.”

Natixis, it seems somewhat agree “given the relative importance of the Italian debt, a credit event of the sovereign would mean the end of the euro. The risk is therefore more specific. It is strongly systemic. This is why the ECB plays an increasing role in this crisis. It has no choice but to buy the Italian debt, even if it is not its role. Taking sovereign risk to their account and inflating its balance sheet (which is objectively nothing serious), it empowers the banking sector to the (good) risk elsewhere and to support real economy, “said a research note signed by the Director of Economic Research, Philippe Waechter.

But at the same time, the establishment of a national unity government wades in Greece against the backdrop of disagreements among stakeholders. And it could be the same in Italy, after the departure of “Cavaliere”.

In addition, “some official statements are far from reassuring ‘, says Aurel BGC. “Uncertainties about the future status and role of the EFSF do not encourage investors, particularly Asian, to lend. The latest issue of the EFSF went wrong with a rise in long rates. If even the EFSF can borrow at low rates, the credibility of the rescue of the Euro zone is questioned, “analysts fear.

In addition, since the IMF, ‘Lagarde, Executive Director of the IMF, urged Asian economies to take steps to guard against the impact of a recession’, also show specialists.