Spainâ€™s new Minister of Finance Louis De Jindos said on Monday (December 26) that Spainâ€™s economy is expected to shrink and show negative growth in the fourth quarter of 2011, and the economy is expected to shrink by 0.2% to 0.3%. At the same time, economists expect the economic outlook in the first and second quarters of 2012 to be less optimistic.
According to this, the Spanish media believes that its economy continues to shrink in two consecutive series, which is a signal that it will return to recession in the coming months. While Spain is currently the fourth largest economy in the euro area, it also faces serious debt problems, and the continued weakness of the economy will cause its own financial problems to continue to deteriorate.
In addition, Italy, the fourth largest economy in the Eurozone, has also caused the market to frown and its deficit reduction plan has once again faced obstacles. Former Italian Prime Minister Silvio Berlusconi said on Monday that his political era is far from over, and criticized his successor. Montyâ€™s fiscal austerity plan believes that the latterâ€™s reform may push Italy into recession.
If Italy cannot effectively implement the deficit reduction plan, it will promote the continuous rise of Italian bond yields, suppress market confidence, and the risk of continued recession in Spain continues to increase, which increases the risk of Italy and Spain applying for assistance.
At present, the amount of funds owned by the IMF and EFSF cannot meet the funding needs of the two countries mentioned above, and the European Central Bank has always held a hard-line opposition to the continuous purchase of debtor bonds.
Although last week, the European Central Bank eased the current market demand for funds by releasing liquidity to the market. However, from the results, this approach could not solve the dilemma facing the euro zone, causing continuous default risks in Spain and Italy.
George Davis, a technical analyst at RBC Capital Markets, said that the recent economic data released by the United States has performed strongly, causing the risk currencies to rebound slightly, but it is expected that the rebound of risky currencies will be difficult to sustain.
Davis also pointed out: "The recent rally in the currency of risk has been largely influenced by investors adjusting positions at the end of the year. After entering January 2012, if the European debt crisis becomes the focus of the market once again, risk appetite may be under pressure again."
In the Asian market today, the euro/dollar has bottomed out, with the intraday low of 1.3042, the pound/dollar falling slightly, the lowest reaching 1.5597, and the Australian dollar falling slightly lower, touching 1.0139.
Traders said that the Asian foreign exchange market is expected to be light, as the UK market is still closed for holidays. The current focus is on how the US stock will perform later. The US stocks will generally rise after the end of the year holiday. If this is also the case, then the euro will rise against the dollar and the yen.
Morgan Stanley analysts pointed out that the euro zone economic outlook is worrying, the European Central Bank was forced to further relax monetary policy and release more liquidity, and the European debt crisis led to a large number of capital flight, the euro is under pressure.
In the latest global economic observation report, JP Morgan pointed out that the economic recovery in the euro zone in 2013 can be described as bleak and that the unemployment rate in the euro zone will climb to above 11% in the next two years and inflation will decline. JP Morgan Chase said that in the current forecast, the euro zone economy will experience a relatively mild recession lasting about one year until the third quarter of 2012. However, the extent and duration of the recession may also be deeper and longer than expected.
Starbatty also stated that the current crisis-stricken countries in the Eurozone have not been isolated, and the sparks of the debt crisis are being shot into the health state. Everyone knows that there is a limit to the aid from Germany and France.
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