Collinson FX Market Commentary: 16 April - Spain the next shoe to drop

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Collinson FX market Commentary: 16 April 2012

Spain looks to be the next shoe to drop! Spanish Banks revealed that they were the recipients of a third of the massive LTRO ECB lending to Banks.

The is a huge red flag to the markets now that Greece has set the precedent. Greek default was managed thus avoiding a complete meltdown in markets but has now given a window to what awaits the remaining recalcitrants. The Spanish Government is said to be in talks with the ECB for further bailout funding while their Bond Yields are rising to critical tipping levels.

This would trigger immediate risk avoidance and a huge negative impact on associated equity, currency and commodity markets. The initial negative sentiment evolved from the Chinese GDP numbers. Earlier rises in markets was based on a growing belief in a 'better than expected' number approaching 9%. The real number missed, coming in at 8.1% if you believe their authenticity.

The EUR sunk back to 1.3070 and the GBP 1.5840. In the US the news from Asia and Europe had further impact on equity markets. Consumer Sentiment dropped with the growing impact of record high gas prices. Commodities were also smashed and the Aussie took a hit falling back to 1.0360 although the KIWI remained fairly solid at 0.8220. This may change if the global fundamentals are rocked by the slow motion train smash coming from Europe.

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