EU Summit: Spanish Bailout?

Will Thursday and Friday’s EU (European Union) Summit be an epic, earth-shaking event or… a disappointment?

Spain is safe?

Moody’s investor services decided to keep Spain’s investment grade rating the same last night. This is significant, it is the first time Moody hasn’t lowered Spain’s rate since late 2010.

Spain remains one step above “junk”. Since their bonds remain investment grade, Spanish investors can breathe a sigh of relief today.

The question is, “Is the Spanish Prime Minister Mariano Rajoy breathing a sigh of relief?”. If Rajoy is breathing easy after this report, the bailout decision could be delayed.

This bailout, when it happens, could have massive unifying implications for the Euro Zone. If Spain is rescued, the euro zone could be moving into closer fiscal union. Forex traders around the world along with other investors and economists will watch this week’s summit closely this week to see if any light is shed on Spain’s decision.

The rate release from Moodys came less than a week after the S&P did downgrade Spain. If Moodys downgraded Spain to junk, I think there would be a higher chance of a bailout plea being made at this week’s summit.

Chances are good that a decision on Spain will not be released this week. Remember this is a two-day-long event and anything is possible. Therefore, we could be surprised so stay alert.

Greasy Greece

Greece appears to be slipping off to the sidelines of the EU Summit’s agenda.

According to a Senior German Government official: “I don’t see the necessity for a significant debate on Greece at
this meeting,”. He also stated, “Of course, it will be a topic at the sidelines of the meeting,”.

German expectations show the trokia will present a report to Greece at the end of November. A tranche of 31.5 Billion Euros hangs in the balance of the conclusions made in that report. The trokia is a term used for the three most powerful organizations over Greece’s financial outlook, the European Commission (EC),International Monetary Fund (IMF), and the European Central Bank (ECB). To read more about the trokia, go to this link.

Dollar Momentum

Let’s cross the Pacific and visit America briefly. Today’s housing data added to the unbelievable amount of positive Dollar news this month. Low jobless claims, low unemployment rate, highest consumer sentiment, highest building permits, and the list goes on. Many of these figures are the best since before the financial crisis in 2008. Is the U.S. gaining momentum? It could be a one month blip before the Presidential Election. Make sure you read our article on How the U.S. Presidential Election can Effect the Forex Market.

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