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Merkel-Sarkozy Meeting in Paris

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Speculation in the media and comments from the Italian Economy Minister fueled speculation for a potential Eurobond discussion but the idea was quickly shot down as Schaeuble told Der Spiegel weekly "I rule out euro bonds for as long as member states conduct their own financial policies, and we need differing interest rates so that there are possibilities of incentives and sanctions to force fiscal solidity."

Most likely we will see statement of solidarity between the two nations supporting the previously agreed upon terms from the July 21st meeting. The two leaders will likely address Italy and Spain as the nations' sovereign bonds have come under pressure the last two weeks with yields on the 10-year bonds rising above 6% before the ECB stepped in with its bond purchases.

ECB bond purchases were expected to range between EUR 10-15 bn though the ECB looks to have come in above forecasts with EUR 22 bn. This shows the market the ECB was serious when entering the sovereign bond market to support Italian and Spanish debt.

Tomorrow euro zone flash GDP will be released with estimates of 0.3% growth for Q2 in contrast to the 0.8% Q1 data. According to the most recent PMI surveys growth is expected to slow both in peripheral Europe and in Germany. French Q2 GDP released on Friday was flat.

Given market positioning from the most recent IMM Commitment of Traders Report the EUR seems ill positioned for a rally with speculators relatively flat and open interest continuing to fall. Though as this is being penned the EUR/USD has rallied sharply past the initial 1.4450 resistance level and is testing the consolidation pattern from the May high. The next resistance is found 1.4535 and 1.4580 with support back at 1.4450 and 1.4130.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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