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Euro Gets A Big Boost After A Rough Day

As a result of the increasing speed of progress in regards to the EU debt crisis, the Euro has started to rally again and it seems as though there is still more room for it to rise before the end of October.

The Euro was hit hard after the news of a potential delay in the EFSF by Slovakia, but it was just recently announced that a deal has been made by the Slovak government and that it should be passed by the end of the week. A G20 finance minister meeting will take place this weekend, so if the news out of there is good, the rally may continue.

There is also some renewed optimism over the new plan that Sarkozy and Merkel are expected to release before the end of October. If the plan that they have designed looks promising and people are confident that other members of the EU will support it, the Euro should skyrocket.

Commodity currencies also jumped overnight, and most investors are awaiting some key economic data from Australia pertaining to jobs and a potential rate cut by the end of the year.

 

Forced To Recapitalize? Banks Have Plans Of Their Own…

With the next round of stress tests coming around, banks are looking for creative ways to meet the new thresholds required of them.

No official word has been given, but most people are expecting a ration of around 9% to be the passing grade. If this is the case, a large number of major banks would fail this test and be forced to recapitalize.

But, what most people don’t realize is that when they are forced to do this at a time like right now, they take a big hit in value. They are currently trading at a very discounted level, and there just isn’t the liquidity out there for them to recapitalize without loosing a whole lot of money. They just don’t want to do that. What can they do to meet the passing ratio instead? They can get rid of assets and work on the other side of the equation.

If major banks decide to sell of assets instead of recapitalizing to meet the required rations, it could cause some major problems for businesses and could stagnate growth at a time when it is needed most. If they did take action on this, it would be even more difficult for people to get credit and financing, and the volume of lending would go way down. This is something that needs to be avoided.

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