The conclusion of the EU summit on Friday failed to produce a staggering proposal which would act as the Eurozone’s magic bullet – but thus far the market has been uncharacteristically forgiving on EURUSD, equity markets and bonds. It was already apparent before the release of the summit’s communiqué that the meeting had failed to produce tangible progress on a number of fronts. The first key shortfall was the summit’s ambition to provide a united European front; instead the UK exercised its right not to participate, and three other countries (Hungary, Sweden and Czech Republic) pledged to hold referendums before committing. Germany also appears to have blocked key elements which could have been cause for optimism, including the issue of awarding the ESM a bank license.
What the statement did provide was further details on the mechanisms of the new ESM which is scheduled to be deployed in 2012. However, it is still surprising that so little new information has managed to appease the previously blood-thirsty market, leaving EURUSD still at 1.3300 levels, and Asian equity markets broadly higher on the day. The Nikkei is +1.4%, the Hang Seng is trading roughly unchanged, while the Shanghai Composite is one of the few struggling indices, down by around -1%.
With today’s data calendar extremely light, we expect risk appetite to be vulnerable. In particular, we believe the grace period on EURUSD and European bond markets will be short-lived, and that the pessimism experienced so acutely over the past few weeks will return once the summit communiqué is completely digested and found to be lacking in much nutritional value. Later in the week, both the FOMC and Norges Bank are due to hold rate meeting, but key focus is likely to remain on whether the SNB will raise the EURCHF exchange rate floor on Thursday.
By
M.Zohaib Gadit
Forex Trading Consultant
What the statement did provide was further details on the mechanisms of the new ESM which is scheduled to be deployed in 2012. However, it is still surprising that so little new information has managed to appease the previously blood-thirsty market, leaving EURUSD still at 1.3300 levels, and Asian equity markets broadly higher on the day. The Nikkei is +1.4%, the Hang Seng is trading roughly unchanged, while the Shanghai Composite is one of the few struggling indices, down by around -1%.
With today’s data calendar extremely light, we expect risk appetite to be vulnerable. In particular, we believe the grace period on EURUSD and European bond markets will be short-lived, and that the pessimism experienced so acutely over the past few weeks will return once the summit communiqué is completely digested and found to be lacking in much nutritional value. Later in the week, both the FOMC and Norges Bank are due to hold rate meeting, but key focus is likely to remain on whether the SNB will raise the EURCHF exchange rate floor on Thursday.
By
M.Zohaib Gadit
Forex Trading Consultant
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