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Forex: Argentinean “corralito” arrived to Europe

FXstreet.com (Buenos Aires) - Back in May 2012, fears that Greece may leave the EU triggered bank runs in the country, and many economist speculated with the possibility of the country establishing a “corralito”- the economic measures taken in Argentina at the end of 2001 that almost completely froze bank accounts and forbade withdrawals from U.S. dollar-denominated accounts. Bank runs extended then to Spain and Italy, although they finally come under control.

But revival came back this weekend: Cyprus bail-out approval cost almost €6 billion to taxpayers, which next Tuesday –Monday will be declared bank holiday-, will find something different in their bank accounts: a one-off 9.9% levy imposed on all deposits over the insurance threshold of €100,000. For accounts below the insurance ceiling, the onetime tax will be of 6.75%.

Cyprus PM Michael Sarris, admitted it was a tough decision, and even stated “I wish I was not the minister to do this,” although he added that “much more money could have been lost in a bankruptcy of the banking system or indeed of the country.”

Without a rescue, Cyprus would default and threaten to unravel investor confidence in the EU that has been fostered by ECB’s president Mario Draghi promise to do “whatever it takes” to shore up the currency bloc.

However, a precedent has been set, and this partial “corralito” may trigger exactly what is trying to prevent: an erosion in investors’ confidence in the EU, and bank runs, if not in Cyprus, in the rest of the peripheral troubled countries. Monday European opening may see bank runs, particularly in Spain and Italy, and a domino effect may force governments to take extraordinary measures. “Corralito” arrived to Europe, and may be here to stay.

Forex: EUR/USD closes week with gains & turned positive on monthly chart; Are buyers waking up?

Not so fast! After falling to 2013 lows at 1.2910 on Thursday, the EUR/USD has been trading on recovery mode to reconquer the 1.3000 position and advanced to test the 1.3100. Finally, the EUR/USD closed the week at 1.3070, around 70 pips or 0.75% above the Monday opening price.
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More on Cyprus: levy needs to pass Congress now

In an unprecedented move, European finance ministers had agreed over the weekend, on a levy on Cypriots’ bank account, to save the country near € 6 billion and be eligible for bail-out. The move to take a percentage of deposits in between 6.75% and 9.9%, must now be ratified by parliament...
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