The weekend meeting of G20 nations gave some hope for a speedy plan to be put in place in 2-3 weeks time. So thought Asia during the first night and so thought Europe at the start of yesterdayâ€™s session. Socks went up and so did EURUSD. By 1.3914 it was done â€“ and from there it was almost like a one way road down to 1.3739.
NY was sceptical as one could hear from financial media. And it illustrated the American thinking different from the one we have in Europe. In Europe we are used to EU questions taking time. After all â€“ in respect of eurzone questions â€“ there are 17 of them to agree upon everything.
The Americans want the plan by yesterday and almost canâ€™t understand why not?
As I wrote yesterday â€“ it will be a bumpy week and so far it has all the elements of becoming one.
The German added to the uncertainty by saying that problems would take us into 2012 to sort out. That pulled the trigger for anyone hoping for a quick solution to the problem. Until then 23 October had been seen as the date to get rid of the uncertainty.
Now market looks upon any agreement to be far away. I think it is closer than the market thinks â€“ but I also think the German approach will be to raise only what is strictly necessary. The question is whether that will satisfy investorsâ€™ confidence.
I question the German approach as it is the country in my view which benefits most from having the Euro. But it also benefits from a low Euro â€“ and as such it might benefit from the turbulence?
Asia took EURSD a bit below NYâ€™s low â€“ but then put some more confidence in the pair, taking it back to almost 1.3890.
How far the negative sentiment will take the bearish mood is difficult to predict. For EURUSD it is still only a correction to last weeksâ€™ substantial recovery. 180 pips down is still only an average daily range â€“ and 1/3 of what the pair gained last week.
Not to put all other indicators sidelined, here are the others I pay attention to today:
â€¢ GBP Consumer Price Index (MoM) 08:30 0.40% 0.60%
â€¢ GBP Consumer Price Index (YoY) 08:30 4.90% 4.50%
â€¢ GBP Core Consumer Price Index (YoY) 08:30 3.20% 3.10%
â€¢ GBP Retail Price Index 08:30 237.60 236.10
â€¢ GBP Retail Price Index (MoM) 08:30 0.50% 0.60%
â€¢ GBP Retail Price Index (YoY) 08:30 5.40% 5.20%
â€¢ GBP Retail Price Index Ex Mort Int.Payments (YoY) 08:30 5.50% 5.30%
â€¢ EUR German ZEW Survey (Economic Sentiment) 09:00 -45.00 -43.30
â€¢ EUR German ZEW Survey (Current Situation) 09:00 40.00 43.60
â€¢ EUR Euro-Zone ZEW Survey (Economic Sentiment) 09:00 -44.60
â€¢ USD Producer Price Index Ex Food & Energy (MoM) 12:30 0.10% 0.10%
â€¢ USD Producer Price Index (YoY) 12:30 6.40% 6.50%
â€¢ USD Producer Price Index Ex Food & Energy (YoY) 12:30 2.40% 2.50%
â€¢ USD Producer Price Index (MoM) 12:30 0.20% 0.00%
â€¢ USD Net Long-term TIC Flows 13:00 $9.5B
â€¢ USD Total Net TIC Flows 13:00 -$51.8B
â€¢ USD Fed's Bernanke Speaks in Boston 16:30
The high points for me are EU and German ZEW, US Producer Price Index and Bernankeâ€™s speech in Boston.
In normal times these events would have set the terms for a very interesting day â€“ but as EU debt problems and those for banks are completely dominating the picture, they all come in the background.
The outlook for today â€“ and likely also for a few more sessions â€“ is one of a continued bumpy raid. And it is predominantly EU politicians who will be to blame for this.
I like to see EURUSD lower this week â€“ as an entry point for long positions towards a solution for the banks. While Iâ€™m sceptical to a solution with sufficient money provided to take out all elements of uncertainty â€“ Iâ€™m hopeful for something that will give equity markets some breathing space. That could boost EURUSD around month-end â€“ and as such a long position is an interesting medium term set up for EURUSD. So if EU politicians could keep on talking this week, we should get low enough to trigger my interest.
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