It says a lot for a currency when banks stopped accepting it as a means of exchange. The EUR’s woes continue to pile up and the currency received more bad news unrelated to Europe’s fiscal woes when it was announced that banks and foreign exchange bureax in the UK have stopped exchanging EUR 500 banknotes. The rationale was not because the currency is dropping sharply in value though this is also a credible reason, but due to the fact that 90% of the notes were found to be linked to tax evasion, terrorism and other crimes.
EUR/USD came close to the technical support level around 1.2510. Options barriers will likely provide some strong support around this level, temporarily delaying an inevitable drop to the next support at 1.2457. It was not just the EUR that suffered, with GBP faring even worse, in part due to a wider than expected trade deficit, with GBP/USD heading for a test of 1.4500. Sovereign woes continue to depress the EUR in what is turning into a no-win situation. Fresh austerity measures in Greece, Spain and Portugal failed to assuage market fears, and instead the measures have only heightened concerns about social unrest and a weakening growth outlook.