Portuguese Bond Auction Success Story

By Luke in Currency Articles | January 12, 2011 18:49 |

Portugal has managed to successfully survive their bond auctions today as demand for both 3yr and 10yr bonds sold at above the initial offered price. This is a positive sign for the Portuguese economy despite the fact that they will still need to raise €20 billion to refinance their debt for 2011. Looking ahead the next obstacle for Portugal will now be in April when a larger amount of it’s debt matures and needs to be refinanced.

Tomorrow is Spain’s turn to go to auction, markets seem to have calmed their expectations that the bond auctions will lead to radical sell offs yet will continue to watch closely the outcome of tomorrows auction. Tomorrow perhaps more importantly sees the widely anticipated Bank of England rate announcement, ECB rate announcement and subsequent press conference. The market believes that rates will stay on hold yet seems to believe that perhaps the BoE will have to act on interest rates to combat inflationary pressure that are still mounting.

The UK trade deficit today widened to £8.7bn from the expected £8.6bn. The UK export figures outpaced the import figues at 4.1% vs 3.4%. The UK export industry is expected to suffer moving forward into 2011 as European Governments mount austerity measures set to reign in their painful budget deficits.

The German economy expanded at the fastest pace for 2 years helped by increased exports spurring on the labour market and driving an increase in consumer spending. GDP rose to 3.6% the most since 2009. Forecasters speculate that this expansion will continue and cements the Eurozone as a 2 speed sector.

GBP/EUR has today traded relatively flat on the news today, tomorrow will be influential for direction in the markets as markets focus on what Trichet will do about liquidity for potential bailouts this year.

GBP/USD has broken trend resistance and reversed gaining 1% today. Stocks have advanced as speculators start to reign in Euro negativity and accept that EU officials may still be able to bring the debt crisis under control.

Best Regards
Luke Zorab
Torfx Currency dealer

“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”

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