The Euro-USD slipped from its yesterday high, 1.2629, to 1.2537in Asian trading Wednesday morning. The Euro, nevertheless, demonstrated strength prior to the EC meeting tomorrow. The Euro bears who predicted a collapse in the single currency are not any longer the driving force in the markets. Whether the ECB will be able to live up to the expectations created over the last weeks, is a more complicated question. The best markets in this round can hope for is probably a strong signal of ECB readiness to intervene in the sovereign bond markets, and start buying Italian and Spanish short term bonds and not a detailed debt-buying plan.
The President of ECB, Mario Draghi, indicated that this might be in the cards when he told on Monday to European lawmakers that purchases of short term sovereign bonds to help burdened countries Spain and Italy, did not constitute a breach of European union rules. It represented an effort to stabilize the monetary situation and should not be interpreted as a state intervention in free markets. This has led critics to claim that Draghi is, too, much influenced by French Socialist President, Francoise Hollande, and Italy’s premier, Mario Monti. A final decision on ECB bond buying would most likely not be taken before the German constitutional court in the middle of the month decides on whether German participation in such bond buying is in accordance with the German constitution.
The US markets were weak after the opening after Labor Day. Manufacturing data fall for the third month in row painted a picture of a mixed, slow growing American economy stressing the need for quantitative easing measures. Stocks in Asia continue to be under pressure. Oil prices are down from yesterday’s peak. Brent crude is trading at 114 with NYMEX again tipping below 96. Gold is stabile at 1695 and silver at 32,20 demonstrates continued strength.
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