Austrian Acts to Prevent Euro-zone Banking Collapse

The Euro experienced a torrid time overnight with the EURUSD slumping to lows of 1.4525 before rallying to its present value of 1.4540(see Charts).

This further Euro deterioration has been mainly caused by two major events. Early this morning, the German ZEW survey posted a drop to 50.4 from 51.1 against an expected 50.0 suggesting a sluggish economic recovery.

In addition, Austrian announced the nationalization of its sixth largest bank in an attempt to prevent the European Banking System from collapsing. Press releases overnight also reported that Austrian’s fourth largest bank had been placed on a watch-list although a subsequent official statement claimed that this information was inaccurate.

If the above is not enough, the single currency is also finding itself under increasing pressure after Greece announced spending cuts yesterday to try and reign in its huge debt problem. The resultant increases in risk aversion is forcing the Euro to spiral downwards especially against the dollar.

There is a major event risk at 8.30am EST, when the US posts its Producer prices which are forecasted to increase by 0.8% in November. In addition, the Empire Manufacturing Index is expected to also rise to 24.00 from the previous month’s reading of 23.51.