Euro slides over Portuguese woes

The euro is in the red versus the US dollar this morning after a spike in Portuguese bonds yields.

The euro is trading at $1.2951, down 0.2% as the sudden jump in Portuguese bond yields spooked traders. The yield on the ten-year government bond is now above 8%, the highest it has been since November, which means that the cost of borrowing for the Portuguese government is now at an unsustainable level.

The administration in Lisbon has been under pressure for the past few days after the finance minister and foreign minister resigned, bringing about the sudden jump in the bond yields. If the cost of borrowing for other eurozone counties also rises, we could see the euro lose more ground to the dollar.

At 1.15pm (London time), the US ADP employment report is released, providing a clue to Friday's unemployment rate. The Federal Reserve is gearing its monetary policy towards the US unemployment level, and if the jobless rates fall we could see traders sell the euro and buy the US dollar.

Spot FX EUR/USD chart

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