Spanish President Mariano Rajoy held talks with European Council President Herman Van Rompuy on Tuesday in Madrid. During a press conference following the meeting the Spanish leader stressed the importance of finalizing the construction of the EU banking union by the end of 2012. He also said that Greece's exit from the Eurozone would be a failure for entire Europe. Van Rompuy praised the determination with which Rajoy's government was introducing reforms and assured that the EU was prepared to grant a bailout for Spanish banks as soon as a formal request was submitted.
According to an ECB spokesman, the central bank's president Mario Draghi decided to cancel his trip to the economic forum in Jackson Hole, Wyoming, due to a “a very heavy workload.” Draghi's speech was highly expected by investors who hoped for hints on ECB's bond purchase program. The ECB will hold its monthly monetary policy meeting on September 6.
EUR/USD: The EUR/USD was trading lower at 1.25547 at the time of writing after U.S. home price data came in much better than economists forecasted, overshadowing poor consumer confidence data. Trading is likely to be sticky on the European session ahead as investors are waiting for the Italian consumer confidence and retail sales at 07:00 GMT, German CPI at 11:00 GMT and Italy bond auctions to get some visibility on the pair early on. Later in the day, Germany will release its CPI data at 13:00 GMT while, the U.S. will release its GDP data at 13:30 GMT and data on pending home sales, In addition, the Federal Reserve will release its Beige Book at 19:00 GMT. Yesterday, European Union President Herman Van Rompuy said the region’s rescue fund is ready for rapid action to aid Spanish banks and the news boosted the demand for the EUR intra trade. Furthermore, sustained growth rates would put to rest for now talk the Federal Reserve will stimulate the economy with a new round of quantitative easing, which sees the Fed buying assets held by banks, pumping the economy full of liquidity to encourage investing and hiring, weakening the dollar in the process. Market sentiments are very sensitive to news. Investors should be very prudent. The resistance level is at 1.25905 and the support level is 1.25233.
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