Continuing with the trend of headlines driving financial markets the European trading session was highlighted by the announcement of a joint Sarkozy/Merkel statement to be released later today. Upon the news hitting the wires both European equities and the EUR/USD rallied to their daily highs. Subsequently the report turned out to be false and the gains were squandered.
Yesterday markets rallied in the North American trading session on reports China would begin buying Italian bonds. This morning the report appears to have contained mixed information and the EUR declined following a clarification by Chinese officials.
As previously mentioned in this forex trading blog , these types of events highlight the forces at work in markets which are driven not on economic data or fundamentals but on headlines and a little bit of panic thrown in. FT Alphaville has a done a good job summarizing today's events.
According to Greek State TV, Greek PM George Papandreou will hold a conference call tomorrow with German Chancellor Angela Merkel and French President Nicolas Sarkozy. A position of solidarity needs to be staked out to support the financial markets that appear to be in a panic since last Thursday.
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