EURGBP Falls on Merkel’s Comments

The previous European trading session saw the decline of the Euro against the British pound as German Chancellor Angela Merkel’s comments shook the financial markets. In the UK, the unemployment rate in May dropped to 8.1 percent, as the London Olympics helped the creation of jobs in the country. In today’s European trading session, the EURGBP pair is expected to drop as demand for the single currency continues to weaken.

The struggle of Spain to recover from the economic crisis continues as bad loans in May jumped to an 18-year high, stoking concerns that it would further weaken the country’s financial system. The ratio of bad loans held by Spanish banks rose to 8.95 percent, from 8.72 percent in April, according to Bank of Spain. Concerns that more bad loans would surface at a time that the economy weakens, shored up borrowing costs for Spain, where the unemployment rate is already close to 25 percent.

Meanwhile, Merkel’s comments spooked markets that are already worried about the Euro Zone’s economic outlook. According to a media report, the comments of Merkel were posted on the website of her Christian Democratic Union party. “We have not yet shaped the European project in a way that we can be sure that everything will turn out well, we still have work to do.” She however expressed optimism that they would succeed in overcoming the debt crisis. Coming from Merkel, the EU leaders still have a lot of work to do as their efforts always seemed to be futile. With weak defenses against the debt crisis, the single currency is likely to remain under pressure. As such, a short position for the EURGBP pair is recommended in today’s trades.


Article by: AlgosysFx Forex Trading Solutions