Previous session overview

The euro has fallen fast after investors judged the European bank stress-test results to be overly lenient, with just hours to go before the results are officially released.

Traders have reacted negatively to news that the tests would cover only banks' trading books, rather than their outstanding debt holdings, with the euro shedding around a cent against the dollar to trade under USD1.28.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.887 from 82.611.

The London-based Committee of European Banking Supervisors has tested 91 euro-zone banks to see whether they would fall short of minimum capital requirements under different adverse scenarios.

A steady drip of leaks and optimistic predictions from lenders, central bankers and politicians suggests that the vast majority of banks in even the most troubled economies are likely to pass.

That has prompted economists to wonder whether the tests would be sufficiently stringent to convince investors that Europe's banks had put the debt crisis behind them.

Market expectation

The tests, which gauge whether Europe's banking sector has sufficient capital, are the day's biggest event, and the outcome could determine the direction of the euro as well as the dollar next week, said analysts. Results are due at 1600 GMT.

If too many banks fail, it could spark panic about the health of the euro-zone banking sector; if too many banks pass, markets may discount the tests as not credible.

Disclaimer: the data made available by Dukascopy Bank SA is for informational purposes only. Publication of this data by Dukascopy Bank SA does not constitute provision of investment advice and Dukascopy Bank SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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