After last week’s talk of the need for and the subsequentannouncement last week-end of a rescue plan for Greece, the Euro failed to holdon to its early gains and succumbed to speculation that the aid wasn’t enoughonly to finish slightly better for the week.
After last week’s talk of the need for and the subsequentannouncement last week-end of a rescue plan for Greece, the Euro failed to holdon to its early gains and succumbed to speculation that the aid wasn’t enoughonly to finish slightly better for the week.
On Monday, the EUR USD settled into a range after gappingopen and pulling back from its high throughout the
The commodity and equity markets gave mixed signals onMonday, Initially, both asset classes rallied as the Euro broke out to theupside. Some traders felt that this new agreement eliminated concerns about
Tuesday, brought a different kind of trade to the markethowever. Throughout the session, the Euro wavered from up a few pips to down afew pips as very limited news changed hands. This trading action took placeshortly after
The U.S. Dollar extended its earlier losses against the Euroon Wednesday, driven by the dovish testimony of Fed Chairman Bernanke. Inaddition to commenting on the direction of interest rates, Bernanke alsoemphasized that the economic recovery was still sluggish because of thefloundering labor market.
Testifying before the Joint Economic Committee, Bernankereiterated the Fed’s stance that interest rates would remain low for an“extended period”. He also said “theincome data suggest that growth in private final demand will be sufficient topromote a moderate economic recovery in coming quarter”. Finally, he added that“significant restraints on the pace of the recovery remain including weaknessin both residential and nonresidential construction and the poor fiscalcondition of many state and local governments.”
All of this added up to the perception of a weaker Dollar.Investors who were banking on a more hawkish comment aggressively pared theirpositions.
Prior to the Bernanke testimony, the U.S. Dollarstrengthened a little following a better than expected Retail Sales Report.This report was another sign that the consumer was helping the economy torecover, but the strength it generated was short-lived due to the Bernankecomments.
Bernanke’s testimony put the dismal Greek financialsituation on the back-burner for at least a day. The EUR USD rose due toexpectations of lower
The night before
On Thursday, after a sharp overnight sell-off it becameclear that market participants were feeling jittery again about the Eurobecause of concerns over
High premiums demanded by investors on Greek bonds rose 400basis points above the German Bund for the first time since the rescue plan wasannounced on April 11th. This was the clearest sign that investors werebecoming worried again. In addition, after three tries, the Euro was unable totake out the high reached Sunday night at 1.3691. Hedge funds continued to beshort and appeared to be adding to their positions on each rally.
By Thursday’s close, the course of the Euro remained weak. Nextweek, several European Union nations will be meeting to approve theircontributions to the EU bailout plan. This voting process could be anothersource of turmoil for the Euro. Not only will these nations have to put up themoney to back
Now that traders have had almost a week to digest the EUrescue package, a consensus is building which believes that this plan wasnothing more than a short-term fix and that long-term problems still exist.Some sources say the key to a long-term solution to the sovereign debt problemsin the EU sits firmly on
Finally on Friday, a combination of a weaker Euro and asharp break in