Good morning everyone
I hope none of you have been grievously injured by Van Rompuy's verbal diarrhea. Never underestimate the power of a short covering rally. Nobody actually had to buy the Euro to cause this. All they had to do was close their sell positions. Impressive isn't it? Personally I am very pleased because my E/U sell limit orders got triggered and my U/CAD buy limit order also got triggered.
Now let's look at what has changed to cause this and what the implications are. Honestly I have not fully digested what is happening yet, but from my initial view of things, I have surmised the following...
1. The EFSF/ESM will be allowed to recapitalize banks directly once a banking monitor is set up. Such banking monitor is supposed to be the ECB.
2. Struggling EZ nations will also have access to EFSF/ESM funds to fund themselves when the market does not have the appetite to do so at reasonable rates.
Wow, is that it? Yep that's it. So why such an impact? Well that's because it has long term implications for EuroZone debt finance. If the banks are strong and have access to recap funds, plus the nations are virtually guaranteed a second source of funds in case the market doesn't feel up to funding them, that keeps the bond yields lower than they have been in the last few weeks.
Now let's keep in mind that details are still sketchy and Merkel left the summit without making any comment. I have seen this a few times in the past. Van Rompuy and Barosso both have a habit of making things sound like they are a done deal when in fact there is no consensus. Just because a majority of EU leaders have agreed, it does not make it a deal. In Europe, only one nation has to disagree and the deal is dead.
Before deciding which way this puppy is going, I want to hear from Frau Merkel.
Regardless of what happens and how this deal works out, I am not willing to speculate that we will get another wave of bullish moves. In fact I highly suspect that this move will be faded today. The summit is over so the risk event is behind us. Now it's just a matter of one negative comment from Merkel or Schauble and the bears will jump right back in.
HINT: Keep your eyes on the EZ 10 year bond yields. Spain in particular.
So... I'm waiting
E/U H4
I hope none of you have been grievously injured by Van Rompuy's verbal diarrhea. Never underestimate the power of a short covering rally. Nobody actually had to buy the Euro to cause this. All they had to do was close their sell positions. Impressive isn't it? Personally I am very pleased because my E/U sell limit orders got triggered and my U/CAD buy limit order also got triggered.
Now let's look at what has changed to cause this and what the implications are. Honestly I have not fully digested what is happening yet, but from my initial view of things, I have surmised the following...
1. The EFSF/ESM will be allowed to recapitalize banks directly once a banking monitor is set up. Such banking monitor is supposed to be the ECB.
2. Struggling EZ nations will also have access to EFSF/ESM funds to fund themselves when the market does not have the appetite to do so at reasonable rates.
Wow, is that it? Yep that's it. So why such an impact? Well that's because it has long term implications for EuroZone debt finance. If the banks are strong and have access to recap funds, plus the nations are virtually guaranteed a second source of funds in case the market doesn't feel up to funding them, that keeps the bond yields lower than they have been in the last few weeks.
Now let's keep in mind that details are still sketchy and Merkel left the summit without making any comment. I have seen this a few times in the past. Van Rompuy and Barosso both have a habit of making things sound like they are a done deal when in fact there is no consensus. Just because a majority of EU leaders have agreed, it does not make it a deal. In Europe, only one nation has to disagree and the deal is dead.
Before deciding which way this puppy is going, I want to hear from Frau Merkel.
Regardless of what happens and how this deal works out, I am not willing to speculate that we will get another wave of bullish moves. In fact I highly suspect that this move will be faded today. The summit is over so the risk event is behind us. Now it's just a matter of one negative comment from Merkel or Schauble and the bears will jump right back in.
HINT: Keep your eyes on the EZ 10 year bond yields. Spain in particular.
So... I'm waiting
E/U H4
Those who say it cannot be done should not interrupt those who are doing it