Home EUR/USD Endangered by Possible Bailout for Portugal
Forex News Today: Daily Trading News

EUR/USD Endangered by Possible Bailout for Portugal

A bailout for Portugal is gaining traction – Germany and France are pushing Portugal to accept a bailout soon. There is a fresh report in Der Spiegel that says that the core countries of the Euro-zone joined forces and are weighing on  Portugal. Will the Euro fall at the wake of the new week?

This come after the Portugal managed to raise 500 million euros in the fist auction for 2011, but at a very high cost – 3.686% for 6 month bills, a huge leap from the previous auction of 2.045% and unimaginably higher from just 0.59% a year earlier.

Portugal already marked as next domino

Portugal will try to raise 1.25 billion on Wednesday, January 12th.  In the meantime, yields on ten-year notes, reached 7.13%, higher than Spain’s 5.50% (also worrying) and very far from the benchmark German bunds.

News about Portugal raising money “in private”, perhaps from the Chinese, already appeared late on Friday, and failed to cheer the Euro.

These higher costs of money are the reason for a fresh effort to force a bailout, that Portugal doesn’t want. Portugal’s prime minister, Jose Socrates, insisted that the fiscal changes are taking Portugal in the right direction. But many economists say that a bailout is imminent:

“At this stage, it is no longer a question of whether, after Greece and Ireland, Portugal will get help, but when it will,” said Filipe Silva, bond strategist at Carregosa bank.

Portugal was marked as the next domino after Greece and Ireland.

EUR/USD – More falls as markets open?

The Euro had a terrible start to 2011, it fell almost 500 pips, losing critical support at 1.2970. It didn’t even manage to gain against the dollar on the weak US Non-Farm Payrolls.

With the report on a possible bailout during the weekend, EUR/USD could open even lower, perhaps with a Sunday gap. But a weekend gap isn’t that certain, as the Portuguese auction results were already known last week and so was the talk of private money raising.

With all the news about Portugal, it will be interesting to see if Der Spiegel’s report about a bailout, the only news on the weekend, will push the Euro down.

Update: Portugal denies asking for aid. Sounds too familiar to the Irish case…

For a roundup of European events that will move the Euro, and a technical analysis for EUR/USD, see the Euro/Dollar forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.