Euro Failed
Due to recent market events that had a great impact on this week’s trading activities we are sending you our Weekly Update ahead of time on Friday.
Over the past days, the Euro has stuck close to an 11-month low, surprising quite a few who thought that the recent agreement for an E.U. treaty amendment would sufficiently keep it propped up. So why the drop? There are three key reasons:
Last week’s E.U. summit was, to put it simply, a failure. The little gleaned from it did nothing to restore market confidence, and what was lost – the support of the U.K. and the European Central Bank – did everything to undermine it.
The continued refusal by the German Chancellor, Angela Merkel, to agree to bolster the firepower of the existing bailout mechanism is resulting in additional, unnecessary risk to peripheral sovereign bonds. The recent results of the Italian bond auction sent the Euro tumbling to below 1.30.
The Federal Reserve Bank said on Tuesday that they’re sufficiently satisfied with the progress in the recovery of the U.S. economy, thus there is no need for more stimulus in the foreseeable future. That put the squeeze on risk appetite, making the Dollar a favorite among investors.