EURCAD is pushing ahead of recent resistance to continue its current uptrend.
EURCAD – Daily Chart
EURCAD has remained steady despite the Credit Suisse takeover, which wiped out shareholders and bondholders.
EURCAD trades at 1.4653, a pivotal level to determine the following path. Traders can play a definitive break to the upside or the downside.
The Bank of England tried to cool the fears of bond investors after the Credit Suisse takeover by UBS led to significant losses and concerns about damage to other banks.
Euro Survives Credit Suisse Takeover Drama
A particular type of bond, known as AT1, was at the centre of $17bn in losses for investors after the deal for Credit Suisse was pushed through by regulators. Typically, shareholders lose first, but UBS agreed to pay $3.25bn for the equity of Credit Suisse. The move also led to a fallout between Brussels and Switzerland as the ECB, the Single Resolution Board, and the European Banking Authority criticised the Swiss for not following standard bailout rules written after the financial crisis.
“Common equity instruments [shareholders] are the first ones to absorb losses, and only after their full use would AT1s be required to be written down,” a joint statement said
“This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions. AT1 is and will remain an important component of the capital structure of European banks.”
The Bank of England agreed that bank shareholders should see losses before bondholders. International authorities worried that the latest bank deal could undermine the use of the bonds and cut off a $275bn funding source for European banks. The market opened lower in the US and Europe as the bonds of other banks were under pressure.
Investors were also looking at legal action over the move, with a US law firm saying they would defend the case of a “significant percentage” of AT1 investors.
EURCAD will have a double economic release on Tuesday with the latest ZEW economic sentiment figures from Europe and Germany. Sentiment among German economists is expected to drop sharply from 28.1 to 17.1.
Core inflation is also released for Canada, where investors will look for another price dip from 5.9% to 5.4%. The Bank of Canada put the brakes on its aggressive interest rate campaign last month as inflation started to cool.
