The downtrend in Euro against US Dollar continued today due to projected cuts in spending & high amount of write downs by the European banks. The Euro fell to $1.2240 from $1.2306 against Dollar. It is feared that due to increasing losses will obstruct the economic recovery of European region. According to analyst in long run EUR may be very valuable but the short term market sentiment is very negative. Rising unemployment rate in Italy is the major contributor to the negative sentiment towards Euro. Italy is one of the biggest economies in Europe. The debt crisis in Europe has kept the underlying sentiment bearish.
The European Central Bank has warned that the losses suffered by the banks may increase.
In the month of May the Euro dropped about 7.5 percent against US Dollar.
Reduction in Spending
European countries like Greece & Spain are facing great difficulties to control the credit crisis. Greece has announced deficit reduction measures to be implemented in three stages & may involve wage cuts & reduction in pensions. Spain has lost its AAA credit rating as the Fitch Rating Inc., an International ratings agency that provides issuer and bond ratings downgrade its credit rating.
Bank Write downs
As per the European Central Bank (ECB), banks may need to write down their assets in the form of loans & securities by around 90 billion Euros in current year. It is feared that next year this amount may increase to even more than 105 billion Euros due to increased Government risk.
0 comments:
Post a Comment