(menafn – ecpulse)
Another week approaches the end while the European common currency might end this week with gains after recording huge losses in the past week, supported by the improvement seen in the debt market yesterday, where the tension eased pushing bonds higher and yields lower, the thing the supported the sentiment to improve and optimism to spread.
The European Central Bank Executive Board member, Benoit Coeure, clarified yesterday that the mounting pressure in the Spanish debt market may force the ECB to revive the bond-purchase program, where the Bank recognize the dangers behind leaving Spain vulnerable to rising borrowing costs, which have previously forced other highly indebted nations including Greece to seek bailout from the European Union.
Spain struggles with rising costs of borrowing amid concerns the nation might fail to control the budget deficit and at the same time revive growth and recovery, where the austerity adopted by the Spanish government might add more pressures on Spain which is currently suffering from the highest unemployment rate in the euro zone of 23.6%.
However, after the encouraging comments of Coeure the sentiment improved and optimism spread in the market on speculation the European Central Bank will not allow the fall of Spain and will intervene as soon as possible in order to pressure yields lower and bonds higher.
Eyes will be focused today on the Italian bond auction, where the nation is to sell bonds with several maturities in another test after yields eased slightly at the end of yesterday's session. Italian benchmark bonds despite the downbeat short-term bond auction yesterday were able to close the session 1.17% higher as yields shed 2.73% or 0.155 to 5.518.
With the lack of major fundamentals from the euro-area region the focus will be on the debt market with hopes yields will return to sustainability, with the main focus still on Italy and Spain, the most vulnerable indebted nations in the euro zone, following those that sought bailouts. In addition, markets will track the earning season as the focus shift to Carrefour and Roche today.
The United Kingdom will release the trade balance figures for February, with expectation the royal economy trade deficit could have narrowed in February most probably supported by the strong pound which gained slightly against the U.S. dollar, adding value to exports.
In general, the sentiment is expected to remain slightly positive in case the Italian bond sales were run successfully, where an upbeat auction from the nation might support the sentiment to improve further and tensions to ease in the debt market sending yields on Spanish bonds lower, the thing that might provide slight and temporal relief to investors that fear the fall of the fourth largest economy in the euro zone, Spain.