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EUR still under pressure

EUR still under pressure

Although the IMF managed to extract an additional $430 billion in funding during the IMF / World Bank Spring Meetings, this reflects a small climb down from the original target of $600 billion. The US still refuses to contribute additional money and there were a series of comments from non-European governments that Europe needed to do more itself before asking for IMF funds. Canadian Finance Minister Flaherty has already suggested that any further disbursements to the eurozone be voted on twice, first by eurozone members and then by the rest of the Fund’s Executive.

ECB Governing Council member Weidmann criticised current monetary policy settings as ‘loose’ seemingly rejecting IMF advice that further cuts in the main refinancing rate were needed to support economic activity. ECB President Draghi had earlier rejected the IMF’s policy advice.

With the eurozone seemingly at an impasse we have seen renewed upward pressure on Spanish bond yields with 10-year yields rising back above 6% this morning at 6.051%. The first round of French election results are also likely to put some upward pressure on French yields.

Data this morning are all about Europe with the flash estimates of French, German and eurozone PMI manufacturing and service sector surveys released. While French manufacturing sentiment improved there was a sharp deterioration in service sector activity that remains consistent with the eurozone as a whole signalling that it entered a technical recession in the second quarter.

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