The EURUSD rose through the key 1.3000 mark in early European trade today boosted by better risk sentiment flows in the equity markets and reports in the press that Spain was close to formally asking for a bailout from EU – an action that would allow the ECB to step into the bond market and buy Spanish sovereign debt.
Reports in the FT suggested that Spanish fiscal officials are now ready to request a credit line from the ESM thus allowing the ECB to trigger its OMT program. Spanish officials insist however that they will not need to tap the facility as the country is able to manage its financing through the public markets and the move would only be a formality in order to comply with the terms of the OMT structure.
This sort of request would be â€œcompletely differentâ€ to the programmes imposed on Greece, Ireland and Portugal as it would not involve removing Spain from the financial markets.
Spain would not, however, seek to set any public limit on the maximum yield for its ten-year bond, or attempt to make such a request to the European Central Bank, according to Spanish authorities. â€œYou must not show your room for maneuver to the market as the market will test it,â€ the official said.
The euro responded positively to the news, although nothing official has been announced yet, as Spain wants to coordinate its steps with Italy in order to ensure that the two largest southern european economies produce a viable long term solution for their sovereign debt financing woes.
The market will now await the ZEW survey due at 9:00 GMT with consensus forecast calling fro a small improvement to -14 from -18 the period prior.