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Forex Flash: Indebtedness of Eurozone economy is key driver in crisis – Goldman Sachs

FXstreet.com (Barcelona) - The net indebtedness of the whole Eurozone economy, rather than just the public sector, was a key driver of sovereign spreads during the Euro area debt crisis between 2010 and mid-2012: the rise in sovereign bond spreads in this period is better correlated with a country’s initial net international investment position than with public-sector indebtedness.

According to the Economics Research Team at Goldman Sachs, “As became evident during the financial crisis, private-sector indebtedness can quickly migrate onto the public sector’s balance sheet during times of stress. Conversely, private-sector assets reflect a contingent public asset (via taxation) and tend to work towards a more stable public-sector funding environment.”

“In our view, a relatively low stock of net debt for the total economy is required to stabilize the economies of the Euro area periphery. Simply attaining, say, a balanced current account (such as Greece and Spain have done recently) is insufficient.” the team adds.

Forex: GBP/USD retraces yesterday’s losses ahead of US NFP

With the US nonfarm payrolls report ahead, the GBP/USD had some more strength left to push higher, back to 1.5570 in order to fully retrace yesterday’s gains. However, profit taking has made the pair pull back a little. Earlier, the market had moved higher on the release of better than expected UK Markit Services PMI, up from 52.4 to 52.9 in April, instead of staying unchanged as expected.
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Forex Flash: Central banks mull ramifications of QE – BMO Capital Markets

At the top of the macro economic "food chain" inside of the policy sphere, there remain two diametrically opposed paradigms at present, which we think are having an impact on FX markets in general, but for our purposes here the EUR. The Fed, BoE and BoJ have started with QE and will presumably over time wean themselves off of it.
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