Euro Market Update 11 June 2009

EXCELLENT TIME TO BUY EUROS June’s edition of the European Central Bank Monthly Report is the only item of significance on the economic calendar for the upcoming session. The document is unlikely to offer much by way of new insight beyond what was revealed at the last monetary policy meeting. Other factors may stir Euro volatility however, as a proposed EU-wide financial regulation scheme threatens to stoke a backlash against the ECB while a currency crisis continues to loom in Latvia, warning of potential contagion. A failed bond auction has seen the Balkan country scramble to cobble together an IMF-backed rescue package to avoid a massive depreciation of the local currency. Western European banks are heavily invested in Latvia as well as neighboring Lithuania and Estonia; if the currency collapses, the value of Western European investments in the region will go with it, putting intense strain on lenders already battered by losses from the subprime crisis. Needless to say, such a scenario could weigh heavily on the Euro as traders seek to distance themselves from the turmoil.

The Euro looks increasingly vulnerable however many traders will be taking profits from the "highs" we have seen, which at present is the highest level we have seen (GBP/EUR) all year, althought there is positive momentum in the markets a technical correction will limit further upside movement over the coming days so buyers are advised to take advantage.