Spain's refusal to request credit line is hitting euro
Spain's unwillingness to ask for financial assistance is having a negative effect on the euro, experts have warned.
According to foreign exchange specialist HiFX, there has been a "sharp reversal in sentiment" towards the single European currency in recent weeks.
This, it said, is partly because Spain seems to be reluctant to "request a credit line from its neighbours" – a move that could enable the European Central Bank (ECB) to take action on tackling the eurozone debt crisis.
Andy Scott, premier account manager at HiFX, said a continuing drop in activity and confidence across the financial bloc is also having an impact.
As a result, the euro has failed to build on the "strong recovery" it experienced after the ECB announced its bond-buying scheme.
Mr Scott noted that in the wake of the announcement, the euro managed to rally against the Swiss franc and reached its highest point against the dollar in four months.
However, he said it has since experienced a decline of over two per cent against both the dollar and the pound.
"As we look forward, there doesn't appear to be a reason to become more bullish towards the euro," Mr Scott commented.
He predicted that Spain will put off asking for aid until the "last possible moment", which means policymakers in Europe will continue to focus on debt discussions until this time.
Mr Scott said this means they will not be able to step up their focus on the economic situation, which has deteriorated badly as a result of the "ongoing crisis" in recent years.
He added that events in the past few years have demonstrated that each nation will "pursue their own best interests" until they are forced to adopt measures that are best for the entire eurozone.
This comes after HiFX's director of risk advisory services Tim Kirkham warned the single European currency remains in a highly precarious position.