Markets braced over fears for Spain

Markets are bracing themselves for some turbulent times ahead as they wait to see how effective Spain's newly-elected Prime Minister Mariano Rajoy will be in staving off a bail-out.

Rajoy’s centre-right party Popular Party was swept to power by a record majority on 20th November. He warns voters not to expect miracles in how the country fights its way out of the severe economic crisis, but pledges to win back respect in Europe.

Chris Towner, financial analyst at current specialists, HiFX, believes it is good news that Rajoy won an outright majority as this gives him a stronger mandate to implement tough austerity measures.

But Towner remains cautious about this new leader being able to solve the huge problems that stand in front of Spain. "His appeal to the financial markets to give Spain '30 minutes' has not helped either as the market, having tolerated the sovereign debt crisis now for two years, ran out of patience a long time ago. Asking for time is like asking ‘how long is a piece of string' in the financial markets. Volatility makes time more intense and at the moment investors don't have the time, the money or the patience.”

Commenting on the impact on the forex market, Towner adds, “"Despite a brief rally, the Euro has continued its trend of trading heavily and has started to test the support zone below 1.3500 in EUR/USD. Questions have been asked how come the euro is so strong and it looks to being held up by layers of hope that Europe will be able to sort out its problems. The problem now is that that layer of hope is dissolving and asking for time now is the biggest burden for the euro."

www.hifx.co.uk