@import url(/css/cuteeditor.css); The EUR/USD came under some selling pressure at the start of European trade on speculation that Ireland may now become another hot spot in the region's persistent battle with sovereign debt problems after a Citibank economist suggested that the Emerald Isle needs a second bailout to reduce its debt service costs. Citibank economist William Butler was quoted as saying that, "the most attractive option from Ireland's point of view would be a reduction on the interest it pays on an outstanding €30 billion in promissory notes, issued mostly to deal with the collapse of Anglo Irish Bank." He said Ireland is paying in the region of 6 per cent on this money but it could be refinanced at 3 per cent by the European Financial Stability Facility.
Although Ireland has been touted as a poster child for sound economic recovery after it instituted draconian budget deficit reforms and returned back to growth, the latest data from the country suggests that it may be sliding back into a recession. Yesterday Ireland reported that Consumer confidence slid to 49.2 from 60.1 the month prior - its largest decline since 2001 - while expectations for the next 12 months dropped to 32.4, the lowest level since January 2011. A renegotiation of its interest rate costs would go a long way towards alleviating some of the financial burden the government faces and may temper any political impulse to secede from the EZ if the economic situation deteriorates.
The EUR/USD tumbled to a low of 1.2750 after coming within a few pips of hitting 1.2800 in late Asian trade, but has since stabilized as equity flows remain positive. With little economic data on the European or North American docket for the rest of they day, risk sentiment will likely be the key driver of trade. If equities can extend their rally the EUR/USD could make another run at 1.2800 figure as the day proceeds.
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