Concerns Regarding ECB Action Cause Euro to Turn Bearish

Reports that Germany may oppose plans to lower borrowing costs in Spain and Italy caused the euro to turn bearish against several of its main currency rivals during mid-day trading. The EUR/USD fell more than 70 pips, eventually reaching as low as 1.2294 before bouncing back to the 1.2330 level. The EUR/GBP dropped close to 40 pips to trade as low as 0.7832, before an upward correction brought the pair to the 0.7845 level toward the end of the day. Turning to today, the direction the euro takes is likely to be determined by announcements out of the euro-zone regarding plans to combat the debt crisis in the region. While no formal announcements are scheduled to take place, the markets have seen significant volatility in recent days as a result of comments from euro-zone officials. Any signs that a planned ECB bond buying program designed to lower borrowing costs in the region could be held up by German opposition may result in losses for the common-currency.

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