The number of European banks that got US dollar liquidity from the European Central Bank rose to 5: there is one bank on dollar funding since September, needing $500 million, and now 4 more have joined with $395 million.
The total funding is still low in banking standards: $895 million, but it’s important to remember two things:
- This is a new high: the sum was usually around $500.
- The ECB issues euros, not dollars.
I’ve already noted that the number of banks rose from 1 to 2 last week, as the pressure rose around Greece. The rising tensions around Italy probably starved off more banks.
The situation in Italy has escalated even further, with yields topping the “bailout barrier†of 7%. This could send more banks to the hands of the ECB.
The European Central Bank has many difficult tasks. The most urgent one is lowering Italian yields. The current efforts are far from sufficient to stop the exodus out of Italian yields.
Further reading: The question about the actual existence of the currency rose after Germany’s exporters’ organization said that they don’t need the euro.
In the meantime, EUR/USD is diving even lower, to 1.3560 at the time of writing. There is some support at 1.3550. The significant support line of 1.3650 has been convincingly broken.
For more on EUR/USD, see the euro dollar forecast.
