Foreign exchange market was almost completely fixated on the QE2 and the implications for the dollar for several weeks, allowing the euro to avoid attention on the background of "carnage" on his peripheral bond markets. Investors in general, and Asian central banks in particular are still involved in the reduction of the reserve currency, which pushes the growing profitability of the Irish, Greek and Portuguese bonds, which have not previously been neglected. It seems that now the situation is changing, and the euro fell to 1.3950 in early trading in London. News of these three economies rather mixed. Portugal finally managed to secure the adoption of the pact cost of measures aimed at reducing the fiscal deficit to 4.6% of GDP next year, although the government has been unable to get credit for it. Ireland announced on Thursday for another round of tax increases to 3.6% of GDP, as the country is extremely difficult to convince investors that it can cope with the massive cost of saving the banking system. The EU Commission will work in Dublin over the next few days to evaluate the government budget plans. Irish ten-year bond yield is now at 500 points above comparable German Bund. Greece remains the most vulnerable with a yield above 11% and growing concerns about the fact that tax collections will continue to be a big problem. LCH.Clearnet may soon require the presence of larger deposits for those who want to sell the Irish Bond them, Russia has excluded the Irish and Spanish bonds from the list of permitted investments in sovereign wealth funds. If the hype around the QE2 and the dollar will subside, then it is likely that the forex market returned its focus to Europe and its budget violations.
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