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Forex Flash: EU periphery remains vulnerable to financial distress – Goldman Sachs

FXstreet.com (Barcelona) - According to the Economics Research Team at Goldman Sachs, “The net international investment position (NIIP) deteriorated sharply in a number of peripheral countries prior to the financial crisis, reaching around -100% of GDP in Spain, Greece, Portugal and Ireland.”

These countries proved especially vulnerable to financial distress: despite the initially low level of public debt in Spain and Ireland, excessive private-sector indebtedness, reflected in the NIIP, ultimately created public-sector financial difficulties.

In previous research, we constructed a gauge of external sustainability, which estimates the real exchange rate depreciation required in Euro area countries to achieve a relatively low NIIP within a reasonable period of time.

Forex: EUR/USD pulls back and jumps to 1.3150

A first jump to 1.3147 gave way to a +100-pip plunge to 1.3034 low (around weekly opening price) as first reaction to the better than expected US NFP, including a revision higher of the March figure. Support at those lows, coupled with the Apr-30 low at 1.3055, made the EUR/USD pull back and encounter 1.3150. A volatile Friday ending with weekly gains after last week’s test of the 1.3000 territory and 1.2956 low.
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Forex: USD/CHF topped at 0.9400 and erases rally on NFP

The US NFP report triggered a rally to 0.9400. Capped there, the USD/CHF has then pull back to 0.9320 area, where it trades sidelined.
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