The markets are waiting for any signal that Spanish Premier Mariano Rajoy will swallow his pride and make a formal request for a bailout. A month after ECB president Mario Draghi unveiled his bond-purchasing programme for struggling euro-zone nations that was hailed as decisive boon for the region.
Until the Spanish make a bailout request the ECB cannot act and the lack of movement from either party has caused the markets to grow increasingly nervous. Spanish two year yields have risen by more than half a percentage point since Draghi’s announcement. Action is needed not talk.
“Draghi will be careful, but he will put a little more pressure on Spain to ask for support, given that if that doesn’t happen, market turmoil, market volatility could increase again,” said Elwin de Groot of Rabobank.
Mr Draghi said there was no discussion about rates at the meeting as the governing council was unanimous in its decision.
“Today we are ready with our OMT (Outright Monetary Transaction programme),” Mr Draghi told a news conference.”We have a fully effective backstop mechanism in place, once all the prerequisites are in place as well. OMTs… have helped to alleviate such tensions [in financial markets] over the past few weeks, thereby reducing concerns about the materialisation of destructive scenarios.”
Signs of growing impatience in the markets were summed up by economist Christian Melzer who told Bloomberg; ““From an economic perspective, we don’t need another ECB rate cut, the focus isn’t on rate changes but on Spain and a possible request for aid paving the way for the ECB bond program. It’s up to Spain to make a move now.”
The Pound to Euro exchange rate is currently trading at 1.2432
The Pound to US Dollar exchange rate is currently trading at 1.6118
The Pound to Australian Dollar exchange rate is currently trading at 1.5760
The Euro to US Dollar exchange rate is currently trading at 1.2960
The Euro to Pound exchange rate is currently trading at 0.8043
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