MARKET UPDATE: Tarnishing the Euro’s Good Name

 Market participants openly wondering whether recent fiscal troubles are the start of the end of the European project
 The EUR reacted positively to news that some form of support package is being considered (from France and Germany) but nothing concrete has appeared yet, leaving markets on edge
 The market is heavily short EUR according to IMM data, suggesting a potential sharp rebound in the event that some support package for Greece is announced
 A solution for Greece will only constitutes around 2.5% of eurozone GDP will also not prevent focus from continuing to shift to Portugal, Spain and other countries with fiscal problems despite comments by Moody’s ratings agency to differentiate between the countries
 Even if the EUR rebounds on any positive news about support for Greece any relief is likely to prove temporary and will provide better levels to sell into to play for a medium term decline in the currency

These are the salient points kindly contributed by Mitul Kotecha, Managing Director & Head of Global Currency Strategy at Calyon. To view the full discussion, please click here to visit the original post on his website; The Econometer