29 June 2012

Friday wrap...

All eyes were on the EU summit as traders and investors alike look for renewed optimism to save the struggling Euro. Little was expected at the summit as the market priced in a disappointing outcome with the Greenback rallying in early week trading on a risk off sentiment. However, as usual, the market was surprised in the early hours of Friday's Asian session on a positive outcome for the embattled nations in the Euro. European leaders agreed on a supervisory body for Eurozone banks as well as using the EU rescue fund to recapitalise banks without affecting sovereign debt and fiscal measures. Spanish bond yields fell on the announcement as risk based pairs rallied, including European stock markets. Ireland and Italy will likely get the same treatment but will not be monitored as closely as Greece, providing they stick to their already agreed deficit commitments. 


Whilst the reaction from the summit has been positive, time will tell how effective these measures will actually be. Historically, each EU summit has seen a rally before selling off as the fact settles in. Look for more confirmations in the Spanish and Italian bond auctions as well as growth based commodities such as Copper and Oil. Also, watch the stock market to gauge sentiment from global investors. Next week's US Non-Farm Payroll could also play a major part in the prospects of QE3 which could affect crosses against the Greenback. One headline from Angela Merkel could change the current positive sentiment in the Euro so always look for confirmations in price and trade what you see, not what you think.

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