In recent days the EURUSD exchange rate has fallen owing to reports from Spain that investors stayed away at its recent bond auction, and concerns that credit rating agency Moody’s could downgrade Spanish debt. The EU summit today though is intended to address these concerns and assure the markets that Spain (among other EMU nations) is solvent. So what can we expect?Guest post by Peter Lavelle The most extreme possibility is that EU leaders will agree to collectivise EMU debt (creating E-bonds.) This would take the pressure off individual members of the euro and put the obligation onto a central European financial authority. This is unlikely because: (1) It would involve transferring power to a central EU authority and turn the EMU from a monetary union into a pseudo-political union. (2) Germany would be responsible for the collectivised debt as the chief contributor to any new EMU institution, and Germany doesn’t want this responsibility. The more likely possibility is that EU leaders will agree to make the existing support mechanism (the EFSF) for indebted nations permanent. This is attractive because it keeps closely to the status quo (the relations between EMU members remain the same) yet assures the markets that Spain and other indebted nations will not be abandoned. Of course the tougher question is whether the markets will consider this an adequate solution. Possible objections include: (1) It doesn’t expand the size of the EFSF bailout fund (arguably necessary since Spain could bankrupt the fund if it requests help.) (2) It places responsibility on individual EMU members to repair their own finances. This is a long term process and unlikely to sooth investors looking for short term assurance. However until the Summit closes we won’t know the market reaction, nor the direction the euro takes. Stay tuned! By Peter Lavelle with foreign currency exchange specialist Pure FX. Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.. 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. Yohay's Google Profile View All Post By Yohay Elam Opinions share Read Next AUD/USD – Holding on to Support Yohay Elam 12 years In recent days the EURUSD exchange rate has fallen owing to reports from Spain that investors stayed away at its recent bond auction, and concerns that credit rating agency Moody's could downgrade Spanish debt. The EU summit today though is intended to address these concerns and assure the markets that Spain (among other EMU nations) is solvent. So what can we expect?Guest post by Peter Lavelle The most extreme possibility is that EU leaders will agree to collectivise EMU debt (creating E-bonds.) This would take the pressure off individual members of the euro and put the obligation onto a central… Regulated Forex Brokers All Brokers Sponsored Brokers Broker Benefits Min Deposit Score Visit Broker 1 $100T&Cs Apply 0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 9.8 Visit Site FreeBets Reviews$100Your capital is at risk. 2 T&Cs Apply 9.8 Visit Site FreeBets Reviews$100Your capital is at risk. 3 Recommended Broker $100T&Cs Apply No deposit or withdrawal feesTrade major forex pairs such as EUR/USD with leverage up to 30:1 and tight spreads of 0.9 pips Low $100 minimum deposit to open a trading account 9 Visit Site FreeBets ReviewsYour capital is at risk. 4 T&Cs Apply Visit Site FreeBets ReviewsYour capital is at risk. 5 Recommended Broker $0T&Cs Apply Trade gold, silver, and platinum directly against major currenciesUp to 1:500 leverage for forex trading24/5 customer service by phone and email 9 Visit Site FreeBets ReviewsYour capital is at risk.