Forex Flash: Euro surge might not last – UBS

Forex Flash: Euro surge might not last â€" UBS

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Forex Flash: Euro surge might not last UBS

FITITOL--> FXstreet.com (Barcelona) - The euro drifted lower after the Finnish government announced that Finland and the Netherlands will block ESM bond buying in the secondary markets. While further details were not forthcoming, it does provides further evidence of the hostility radiating from northern Europe â€" one of the key hurdles for major policy breakthroughs in the Eurozone.

After the impressive rally on Friday, the question now is simply one of sustainability. The euro has already seen some modest slippage overnight but with the July 4 holiday in the United States on Wednesday, an ECB policy decision due on Thursday, non-farm payrolls on Friday, and a meeting of Eurozone finance ministers the week after, “the scope for a sharp correction lower seems quite limited.” writes Chris Walker, a research analyst at UBS.

Investors have now had a weekend to digest the outcome of Friday's EU Summit and there has already been a gentle euro downslide as a result. Some progres s was made on three separate fronts but by now the limited nature of the policy initiatives should be well known. “Even though there is a clear intention to use the Eurozone's bailout facilities to buy sovereign bonds in the secondary market, any imminent purchases seem unlikely until outstanding issues around conditionality are fully ironed out.” Walker adds.