The Euro is falling across the board as concerns grow ahead of the EU banks stress test results which are due today at 16:00 GMT.
Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods Ltd mentioned in an interview on Bloomberg TV today that he believes that at least nine banks will fail the stress tests, with results likely to show these lenders have insufficient capital to withstand a prolonged recession.
Meanwhile, peripheral bond spreads are widening over their German counterparts’ bund yields.
As risk sentiment is hampered by fears of poor stress test results, the Euro slipped 72 pips from the European session open of 1.4167 down to 1.4094 by 08:00 GMT. Against Sterling, the Euro also briefly fell to a one-month as investors cut EURGBP positions with fears that the Euro zone’s debt crisis may spread if the stress test results are disappointing. EURGBP touched lows of 0.8744 from the open of 0.8768.
“Scepticism is likely to remain over the credibility of the tests. Their credibility remains in question as they still fail to include the potential impact of a Greek default which appears an increasingly likely scenario,” Bank of Tokyo Mistubishi says in a note.