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Sentiment towards eurozone 'remains shaky'

Sentiment towards euro zone still remains shaky

Uncertainty regarding the eurozone is still an issue among investors, a foreign exchange specialist has noted.

According to HiFX, sentiment towards the financial bloc amid its ongoing debt crisis remains "very shaky". This, it said, means it will not take a great deal to make them lose faith once again.

Andy Scott, premier account manager at HiFX, said that if this happens, it would result in yields going up much higher and Italy being forced into seeking financial assistance.

This is despite the Italian government's insistence that the European country will not need any external support.

Mr Scott was speaking shortly after Italy published the results of a recent government debt auction, which showed that more than €5 billion worth of bonds were sold off.

Following the release of the data, the euro slumped against the dollar and the pound – perhaps a reflection of the continuing uncertainty surrounding the currency at the moment.

"Whilst the yield (the interest rate demanded by investors) was lower than at a previous auction of similar maturities, the bid to cover ratio (level of demand) was low and they didn't sell the full amount they offered," Mr Scott commented.

Much of the uncertainty surrounding the eurozone among investors has also stemmed from Spain's ongoing financial crisis.

Mr Scott noted that the Spanish government will soon unveil its latest round of budget cuts and policies designed to stimulate economic growth.

He said Spain's unemployment rate currently stands at almost 25 per cent, while the economy has slipped back into recession. As a result, he expects the upcoming cuts to be "fairly severe", as the government has so far found it difficult to reduce the country's budget deficit.

"A sceptical market may simply dismiss any ambitious deficit targets set out today and the euro will remain under pressure," Mr Scott added.

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