In US trade, the euro slumped to fresh two-year lows as concerns remained over the timely implementation of the ESM and as another Fed member argued against the need for further quantitative easing.
Despite eurogroup Finance Ministers approving an initial €30 billion injection for Spain and continuing to work on refining the execution of the bailout plan, the recapitalisation process is expected to take up to 18 months, a frustratingly slow timeframe.
Another source of frustration was a Der Spiegel article suggesting that it could take up to three months to rule on the constitutionality of the ESM, instead of the expected one to three weeks. German Finance Minister Schaeuble flagged the risks, warning that any delay ’could mean huge broader uncertainty in markets far beyond Germany and a huge loss of confidence in the Euro area and in its ability to make necessary decisions in sufficient time‘. Comments from St Louis Fed President James Bullard arguing against further asset purchases helped push the dollar index to its highest levels since August 2010, thus placing downside pressure on the likes of the euro.
Having ended yesterday’s Australian session around the 1.2295 level, the euro fell to a two-year low of 1.2235 before recovering to close US trade at 1.2250. Upon resuming for Asian trade the euro is essentially unchanged.