February 6, 2012

Aussie Retails Sales Falls

Filed under: OANDA News — Tags: aud, australia, bureau, deal-if-the, forex round up, funding, international, median-forecast, nation, press, proposals-are, reserve-bank, result-compares — admin @ 6:50 am

Australian retail sales unexpectedly declined in December, the first drop in six months, as consumers spent less at grocers and on dining out in an economy where employment growth stalled last year.

Sales slipped 0.1 percent from a month earlier, when they rose a revised 0.1 percent, the Bureau of Statistics said in Sydney today. The result compares with the median forecast in a Bloomberg News survey of 26 economists for a 0.2 percent gain.

The report validates Reserve Bank of Australia Governor Steven’s decision to lower the nation’s benchmark interest rate by a quarter percentage point on Nov. 1 and Dec. 6 to help revive household demand. The central bank’s board meets tomorrow to decide on rates, and most economists predict a third straight reduction.

Bloomberg

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January 27, 2012

Market Outlook for January 27, 2012

Filed under: Forex News — Tags: a-long-while, advice, aud, australia, creditors, eur, fundamentally, information, japan, markets, price, report, seen-the-high, survey-market, time — admin @ 7:47 am

Recap of the Latest Global News
By Cory Vi & Andrew Su on Jan 27, 2012

In a week that the Federal Reserve announced it would keep interest rates low through till at least 2014 and Bernanke said that policymakers are considering further bond purchases to boost growth, markets continued to celebrate as it appears that more free money is about to be pumped into the financial system. Treasury yields dropped to an all time record low as PIMCO’s Bill Gross predicted a third, fourth and fifth round of quantitative easing. The USD has, not surprisingly, taken a pounding over the week as the QE junkies got the fix they had all prayed for. The EUR is trading higher at above 1.3150.

The surprise news by the Federal Reserve had markets reprice the likelihood of further quantitative easing and sparked a flurry of activity by investors to revalue assets. In our opinion, the reaction in the markets has been overdone and we will likely see a retracement of the USD move in the coming sessions. The impact on riskier currencies such as the Australian dollar has seen it rally to as high as 1.0665 in trade today.

US equities fell yesterday after the Dow Jones rose to its highest levels since May 2008 during the day. Financial stocks where hit by worse than expected new homes sales data which showed a fall in December, for the first time in 4 months. US jobless claims rose while orders for durable goods rose more than expected. Asian stocks closed marginally higher while European stocks are soft as the Greek debt swap negotiations continue.

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January 10, 2012

Aussie (AUD) Approaching Resistance Vs. USD!

Filed under: Forex News — Tags: a-little-deeper, a-should-come, aud, aussie, australia, australian, china, from-the-chart, growth-as-china, however-it-may — admin @ 7:48 am

The Australian dollar (AUD) is probably the best proxy for risk appetite in the forex market as it is one of the most heavily carry-traded pairs because of the high interest rate in Australia. One of the other reasons is because the Aussie dollar is also a de-facto proxy of Chinese growth as China is the largest importer of Australian goods and raw materials.

This week is interesting as there is not a lot of news here in the US, but there is a lot of economic data expected from China. This morning, Chinese trade balance figures came in much better than expected so the risk-on trade carried global stocks higher. But if we look a little deeper into the numbers, the Chinese trade surplus increased because imports decreased. This is potentially bad for Australia despite the fact that China is growing.

There is no economic data of significance due out for Australia this week so the market response to the Chinese data should drive the value of the Aussie, led by Chinese CPI and GDP data.

As you can see from the chart below, 1.04 has acted as resistance in the past so I’m am looking at that resistance to hold on the first attempt to break through, however it may re-approach and eclipse that level if the data should come in better than expected. So the play is to be short AUD/USD just ahead of 1.04 looking for resistance to hold, with the ability to reverse the position should it go down to 1.0275 with an expectation that it will re-test 1.04 at some point soon.

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December 19, 2011

Forex Market Outlook 12/19/11

Filed under: Forex News — Tags: australia, central, crisis, data, find-the-global, housing, japan, markets, rate, release, spain, week — admin @ 7:26 am

The big news of the weekend is the death of N. Korea’s crazy leader Kim Jong Il, which has provided a minor bit of uncertainty in the Pac Rim as it is expected that his son will succeed him. The goes to show that uncertainty is sometimes worse from a market perspective than the removal of a bad situation. I would though have thought that markets would have rejoiced and rallied, but uncertainty rules.

However the markets have bounced back from early selling in Asia and look to open higher here in the US, with both stocks and commodities trading higher. There is still a lot of risk emanating from the Euro zone, and the potential for credit downgrades is looming.

In Spain, bad loans were up as the Spanish banking system attempts to withstand the fallout from the housing bust there and maintain stability despite unemployment that is over 20%, the highest in Europe. This comes after word form ECB chief Draghi maintained that the ECB would not step up their bond purchases, electing to adhere to the Central bank’s mandate rather than favoring practicality.

Later today, Euro leaders will conduct a conference call where they attempt to hammer out the details of the fiscal pact they agreed to at their last meeting. This unlikely to be the final word on the matter and Euro leaders have contributed to the economic demist they are seeing by dragging their feet and not responding to the crisis more swiftly.

Meanwhile they have been swift in asking others for money, particularly the IMF. EU leaders are calling for an additional $261 billion from the IMF and are asking the UK for $50 billion. Good luck with that. The Euro has been vacillating around the 1.30 level vs. USD, which is surprisingly strong given the state of affairs in Europe.

This is a holiday-shortened week so volume may decline as we approach the weekend. News this week from the EU includes German PPI and economic sentiment figures tomorrow, though there is not much else from a data perspective. This is not to say that there won’t be any news, but I will more likely be of an unexpected nature.

There is more news due out from the UK, including the release of the rate policy meeting minutes on Wednesday and GDP figures on Thursday. This could be supportive of the Pound if the BOE decides to take a wait and see approach or if GDP comes in better than expected. The data in the UK has been relatively strong in my opinion, though the markets are a discounting mechanism so surprises could happen to the upside.

In Japan, the rate policy meeting on Thursday is expected to produce no change as the Yen has virtually stopped trading vs. USD. There has not been a lot of volatility in this pair, which is just fine by the BOJ. But, there could be some Yen movement if problems emerge from N. Korea.

From the commodity currency bloc, the release of the RBA meeting minutes in Australia tomorrow, followed by Canadian CPI data on Wednesday and GDP figures on Friday, and rounded out by GDP figures in New Zealand could have an effect on the risk trade. Gold is sitting at $1600 with oil just above $94.

Lastly here in the US, the news releases are heavier toward the end of the week highlighted by the release of GDP figures on Thursday and some ancillary releases packed in. Markets are hoping to escape for the holidays with little fanfare and many are looking forward to putting this year behind us.

While the data here in the US has largely been positive, it is hard to buck the feelings of malaise that overhang the markets and the economy in general. There is absolutely no confidence that things are going to improve, and people are just waiting for the next shoe to drop. This is no way to run an economy as fear trumps sanity and then things don’t improve. Combine this with EU leaders essentially holding the world hostage through their non-actions, and we find the global economy floundering.

Will this continue into next year? Unfortunately, I think so.

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December 14, 2011

Forex Market Outlook 12/14/11

Filed under: Forex News — Tags: australia, below-support, christmas, erring-on-the, euro, franc, further-as-some, inability, meeting, morning, possibility, report-positive, switzerland — admin @ 6:43 am

The Euro carnage continues as I showed in the chart of the day from Monday, as we are now under 1.30 vs. USD and possibly moving lower. While I was surprised by Friday’s market reaction (positive) to the EU Summit where they decided to further delay action, now the market is waking up to the harsh reality of the situation. Though perhaps there was some hope that the US Fed, and not EU leaders, would save the day through monetary policy at yesterday’s FOMC meeting.

However Bernanke did not budge yesterday despite the market sell-off that began before the meeting and then continued throughout the remainder of the day. His comments at the meeting were consistent with previous statements that have already placed the possibility of further easing on the table, but he did not take it a step further as some in the market may have been hoping.

There is a “see-saw” relationship between the US dollar and the Euro as the Euro is considered the “anti-Dollar”. This inverse relationship has been ruling the markets for some time and is partially responsible for the “risk trades” in the market. But I get a sense that those correlations are starting to break down as I mentioned yesterday. US stocks were largely higher for most of the day even as the Euro was tanking, though they caught up and finished lower by the end of the day.

Markets have followed through this morning to the downside this morning with stocks and commodities poised to start lower. US dollar strength has been fueling these declines, but again I am in the camp that thinks these relationships can break from one another.

Overnight in Europe, industrial production figures came in lower than expected, and an Italian bond auction pushed yields higher on 5-year notes to the highest levels in nearly 14 years in stark contrast to yesterday’s Spanish note auction. This is indicative of the headwinds that the Euro zone faces for failing to address the debt problems at the last meeting. Credit downgrades are looming.

On a brighter note in the UK, the employment report came in better than expected with jobless claims coming in lower than expected at 3K vs. 13.5K. The unemployment rate remained steady at 8.3%. This reflects the rising economic tide in the UK that appears to be improving the overall health of the economy. Next week’s release of the BOE rate policy meeting minutes will shed light on whether or not they are in favor of further monetary easing. The Pound has risen vs. the Euro over the last three days as money flows make their way to the stronger economic situation.

One country that is still “strong” but experiencing some economic malaise is Switzerland where the SNB will give their rate decision tomorrow. The Swiss are starting to see some Japanese-style deflation as the franc has strengthened prompting some to believe that the SNB will try to weaken the franc vs. the Euro by lifting the target area from 1.20. With the current tumult in the Euro zone, they may hold steady for now.

Overnight in Australia, consumer confidence figures came in worse than expected, showing a reading of 94.7 vs. last month’s 103.4. This decline has helped impact the Aussie as it is now trading below parity vs. USD. Take a look at my chart of the day from yesterday for a technical perspective.

There is no real news due out here in the US for the rest of the day. Mortgage applications were up 4.1% but that was basically all people trying to re-finance and not new applications. There is some Fedspeak due out later this morning.

CPI data from the EU tomorrow and the US on Friday could be potential market movers but I think it unlikely that this will affect monetary policy in the near term.

While politicians and central bankers around the globe believe that time is on their side, I think they are mistaken. Markets “want” to go higher but are having a hard time because of all of the global economic uncertainty despite the fact that there are some decent economic stories taking place, particularly here in the US. Markets however are forward-looking so with little hope on the horizon, it may be tough sledding going into the end of the year.

Santa Clause may be staying home for Christmas, and investors might end up with coal in their portfolios!

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December 8, 2011

Forex Market Outlook 12/8/11

Filed under: Forex News — Tags: australia, draghi, essentially, figures-came, markets, morning, rates-unchanged, underscores — admin @ 7:32 am

This morning all eyes are on the Euro zone after the two rate policy decisions from the BOE and ECB produced what was expected. The BOE made no change to policy and the ECB reduced interest rates by 25bp, though some in the market may have been hoping for a bit more from the ECB.

This underscores the need for liquidity in the system and Draghi’s accompanying statements are likely to produce volatility throughout the morning. Tomorrow’s results of the EU Leaders summit in Brussels will likely produce nothing that will resolve the debt crisis to the market’s satisfaction. A looming S&P downgrade of European countries including Germany could have ramifications but this is likely going to be similar to the downgrade of the US due to political gridlock.

Earlier this morning in Australia the unemployment rate ticked higher to 5.3% as 6300 jobs were lost vs. an expectation that 10K jobs would be added. However the Aussie rallied higher after the initial sell-off when it was revealed that the participation rate increased more than expected which could have distorted the figure.

In New Zealand yesterday, the RBNZ kept interest rates unchanged at 2.5% which puts them in “wait and see” mode and tomorrow’s release of some Chinese economic data could influence the kiwi. Consumer confidence figures for NZ are also due out tomorrow.

Overnight in Japan, trade balance figures came in better than expected an tomorrow’s GDP release could cause further yen strength. The yen has been strengthening this morning but has just reversed on some comments from Draghi and the ECB (see more below for this recent developments).

In the US, initial jobless claims came in much better than expected posting losses of 381K jobs which is the best number we have seen in some time. This has helped increase risk appetite and the futures market has rallied a bit until Draghi’s comments have soured risk appetite.

Things were moving along nicely until Draghi said the “D” word– deflation. This immediately reversed the market as this essentially means that he is going to print money in the same manner that Bernanke and the Fed do, or at least that’s what the markets believe.

So the Euro has weakened considerably and the US dollar has strengthened going into the US stock market open. The ranges are widening and the volatility persists so the fate of the Euro and other markets may lie with the EU Leaders meeting tomorrow. This unfortunately does not give me confidence.

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December 7, 2011

Forex Market Outlook 12/7/11

Filed under: Forex News — Tags: 2012-as-opposed, announcement, australia, combination, envy, morning, move-the-needle, over-the-debt, produce-results, rates-unchanged, top stories, underlying — admin @ 7:10 am

This morning’s market action can only be described as “blah”. There is little going on this AM as there is apparent “Euro fatigue” and only the most stalwart market participants are doing anything, not that there is necessarily anything to be done.

News has been trickling out of the EU negotiations over the debt crisis and there is cautious optimism that something, anything will get done. What will not be done is the combination of the current and future bailout funds as Germany essentially rejected the idea. The speeding up of the current ESM is what is on the table and that appears to be viable, meaning that the funds will be available in 2012 as opposed to 2013.

But again, it doesn’t solve the underlying problem. Greater fiscal responsibility is the most important aspect of any deal so a closer fiscal union and treaty changes to allow those changes will likely be the outcome of Friday’s EU leaders meeting. US Treasury Secretary Geithner is there to “oversee” the process, essentially acting like a parent standing over a child and forcing them to do their homework.

Meanwhile, industrial production figures came in lower around the globe with one notable exception—Germany. Their industrial production figures rose .8% vs. an expected .3%, though that wasn’t enough to prevent the mild sell-off we have seen this morning.

The Euro is trading slightly lower on a lack of faith that the EU process will produce results, and there is no news on the docket here in the US that may move the needle.

Overnight, GDP figures in Australia came in much better than expected, showing a YoY gain of 2.5% vs. the expected 1.9%. It is these types of numbers that leave me scratching my head when I see something like the RBA reducing interest rates. Tomorrow’s employment report may disappoint, but by and large the Australian economy looks pretty strong.

The Loonie in Canada is making recent highs and was nearing parity with USD as oil prices and a renewed economic outlook are positive developments, and the fact that the BOC left interest rates unchanged at yesterday’s rate policy meeting. Later this afternoon, the RBNZ is expected to leave rates unchanged at their rate announcement.

The Swiss franc has been weakening as unemployment figures have come in as expected showing 3% unemployment that is the envy of any developed nation. What is not the envy however is the strength of the franc that has investors believing that the SNB will take action again to weaken it.

Tomorrow’s rate decisions from the ECB and the BOE should produce some fireworks with the ECB expected to cut 25bp and the BOE expected to remain unchanged.

But the big news this week will be the announcement from the EU meeting and with the specter of rating downgrade looming above, hopefully something will get done.

However, hope and optimism isn’t an investing strategy, so I prefer to keep my trading to the short-term.

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December 6, 2011

AUD and CAD take different routes

Filed under: OANDA News — Tags: a-carry-gain-, aud, australia, chf, currency, data, dean's fx, gbp, governor-carney, loonie, market, other dollars, past, unemployment — admin @ 11:58 am

Governor Carney did what was expected and kept Canadian rates on hold (+1%) this morning. The accompanying statement was a tad surprising, less dovish than expected. The fact that the Bank mentioned that there was “considerable monetary policy stimuli” in place, coupled with policy makers noting that CPI would run a tad higher than forecast and that they see US growth “slightly more robust than foreseen’ has helped the CAD to outperform most of the other major currencies today.

Fixed Income traders have trimmed future rate expectations. They had almost fully priced in a -25bps rate cut by next June, but this has been pared to +80% after the Bank stood pat and sounded less dovish than expected. Another reason for the firmer tone for the currency is the underlying story of the CAD in demand for safe-haven flows in light of AAA rated countries elsewhere under pressure from S&P. Canada is seen as an investor’s refuge from the Euro crisis without the risk of US budget deficit and political deadlock. The loonie has been the best performer in the past month outright amongst the most-traded currencies. It’s expected that Carney will be the only central bank leader in the G10 to raise interest rates next year. This is on the back of inflation having exceeded the Bank’s+2% target for eleven-months as the economy grows at double the pace of the G-7 nations.

Other data handily beat market expectations. Canadian Ivey PMI was at 59.9 seasonally adjusted last month vs. 54.4, indicating that purchasing activity has again expanded. Disappointing however was the sub-category employment index print of 49.4, indicating that employment was lower than in the previous month. Last week, Canada reported losing -18.6k jobs in October and the unemployment rate ticking up to +7.4%.

Over the past few sessions the loonie remains handcuffed to EUR headlines, tightly trading in its own range. Currently, the currency seems well supported above 1.0220 and with resistance below 1.0100. Expect the currency to trade close to this range until the market gets a clearer picture of Euro intention by weeks end.

Loonie

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December 5, 2011

Forex Market Outlook 12/5/11

Filed under: Forex News — Tags: a-fiscal-union, aussie, australia, china, decision, euro, forex, fundamental, invest, japan, loonie, number, oil, solve-it-faster, yen — admin @ 7:42 am

This week like many others in recent history is going to be all about the Euro. I’m sure you are all surprised by this; as the Euro zone has been relatively quiet of late. Ha, just kidding. Obviously the Euro zone debt crisis has been the major topic in financial markets and the impediment to market advancement.

Last Friday’s Non-Farm Payrolls report here in the US left something to be desired despite the great headline number showing a .4% decline to 8.6% unemployment from 9%. The problem is that the number of added jobs came in as expected, and the number was largely a reflection of discouraged workers leaving the workforce. While it wasn’t a bad number, it wasn’t all too great either so the markets sold off accordingly ahead of the weekend’s potential for a risk event to occur.

However this morning we are back to risk taking mode with a renewed hope that this week will be the week that EU leaders get it all figured out. Friday’s EU Leaders meeting in Brussels is expected to produce words that show progress toward finding a solution. Note that I didn’t say, “find a solution” as we are likely to get more of the same. But leaders now have to do more to assuage market fears and to slow bond vigilante attacks on the PIIGS countries as higher bond yields will hurt the process and there is no way EU leaders can solve it faster than yields becoming unsustainable.

The market would love to hear that they have found a way to have more of a fiscal union, or to at least a way to provide for better oversight. Also, Germany backing away from an outright refusal to consider Euro bonds could also help in the process. The ECB rate policy meeting on Thursday could produce a 25bp rate reduction, as Draghi has been quick on the trigger and may try to halt a potential recession before one even gets started.

Thursday will also bring the UK rate policy decision and it will be interesting to see if they do anything at this point after increasing the asset purchases last time. The BOE has been ultra-accommodative despite the inflation, and the economic data still continues to produce decent results in comparison to the rest of the world.

There are also interest rate decisions for the commodity bloc, with Australia, New Zealand and Canada expected to make no change to policy.

Global stocks are higher to start the morning, as is oil which has just reached $102. Surprisingly gold is not following suit, which could mean that oil premium is a result of the geo-political climate in the Middle East.

There is also manufacturing and GDP data due out for various countries (check the economic calendar), but by and large the biggest driver of markets this week will be the news out of Europe and if we get any unexpected rate changes from Central banks.

The markets definitely want to go higher from here and the Euro debt crisis is the only thing really holding us back. Friday’s EU meeting will be important as to how we close the week, as will various economic data due out of China including manufacturing, retail sales, and CPI.

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December 4, 2011

Trading Week Outlook: Dec. 5 – Dec. 9

Filed under: Forex News — Tags: analysis, australia, bank, chf, contributors, crisis, euro, euro-zone, european, gbp, nzd, outlook, research, time, usd — admin @ 8:07 am

Dec. 3, 2011 (Allthingsforex.com) – With the European Central Bank interest rate announcement and the EU Summit on the horizon, the trading week ahead could prove crucial for the future fate of the euro and the debt crisis-stricken euro-area.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions in the services industries: agriculture, mining, construction, transportation, communications, wholesale trade and retail trade, Mon., Dec. 5, 10:00 am, ET.

In light of the stronger-than-expected manufacturing index, the U.S. services industry activity is also forecast to expand for another month with an index reading of 54.0 in November from 52.9 in October.

2. AUD- Reserve Bank of Australia Interest Rate Announcement, Mon., Dec. 5, 10:30 pm, ET.

The latest economic data from “down under” proved that the Australian “miracle economy” is not immune from the global slowdown, which coupled with easing inflationary pressures has raised the odds of another 25bps rate cut by the Reserve Bank of Australia to 4.25% from the current 4.50% level. A rate cut combined with risk aversion could become the formula for Australian dollar weakness.

3. CHF- Swiss CPI- Consumer Price Index, the main measure of inflation preferred by the Swiss National Bank, Tues., Dec. 6, 3:15 am, ET.

Deflation has once again become a threat as the Swiss inflation gauge unexpectedly dropped below zero in October. With forecasts pointing to another decline at -0.3% y/y in November and the government “examining feasibility” on measures to deal with the strong currency, the Swiss National Bank might be forced into stepping up its efforts to weaken the franc. Although the next move by the central bank is still a bit of a “mystery”, the odds that we could witness a historic decision by the SNB to raise the EUR/CHF floor from 1.20 up to 1.25, or even to 1.30, are rising exponentially.

4. EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Dec. 6, 5:00 am, ET.

The revised reading of the Q3 GDP is expected to confirm that the Euro-zone economy is losing steam, growing by only 0.2% q/q in the third quarter, same as the 0.2% q/q reading in the second quarter of 2011, and less than the 0.8% q/q increase in Q1 2011.

5. CAD- Bank of Canada Interest Rate Announcement, Tues., Dec. 6, 9:00 am, ET.

Acknowledging that the global economy has “slowed markedly” with “significantly less favorable external environment affecting Canada”, the Bank of Canada is not expected to make any changes to its existing accommodative monetary policy and would be likely to keep the benchmark interest rate at the current 1.0% level.

6. AUD- Australia GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Dec. 6, 7:30 pm, ET.

Despite of the anticipated rate cut by the Reserve Bank of Australia, the Q3 GDP might lend some support to the Aussie with forecasts pointing to a stronger 2.3% y/y growth in the third quarter of 2011, compared with 1.4% y/y in Q2 2010. On the other hand, quarter-on-quarter growth is forecast to be unchanged at 1.2% q/q in Q3, same as the 1.2% q/q growth in the second quarter.

7. NZD- Reserve Bank of New Zealand Interest Rate Announcement, Wed., Dec. 7, 3:00 pm, ET.

Becoming the most surprisingly hawkish of all major central banks, it would be interesting to find out if the Reserve Bank of New Zealand might change its position as a result of the global slowdown. The bank is expected to keep rates at the current 2.50% level for another month, but the Kiwi dollar could get a boost from any hints that the bank is still not steering away from a future rate hike.

8. GBP- Bank of England Interest Rate Announcement, Thurs., Dec. 8, 7:00 am, ET.

With the largest U.K. trading partner, the Euro-zone, slowing and the EU debt crisis far from over, the odds are rising that the Bank of England’s policy makers could be prompted to increase the size of the Asset Purchase Program beyond the current 275 billon pounds; however, they might decide to wait until 2012 to do so. In the meantime, the likely outcome of the MPC meeting would be to keep the benchmark rate at its record low 0.5% level and to leave the door open to additional quantitative easing if conditions deteriorate. As a result, the GBP should continue to be confined in its current $1.50’s range, unless the EU debt crisis take a turn for the worst and massive risk aversion sends the sterling into the $1.40’s against the U.S. dollar.

9. EUR- European Central Bank Interest Rate Announcement, Thurs., Dec. 8, 7:45 am, ET.

As many economists lower their Euro-zone growth forecasts and the ECB President warns about the potential for a “mild recession” on the horizon, it shouldn’t be a surprise to see the European Central Bank producing another 25bps rate cut at the upcoming meeting in an effort to avoid a double dip. Navigating through a sea of uncertainty, while at the same time trying to fend off political pressure to become the “lender of last resort”, the ECB might end up giving up the resistance and turning the printing presses on if the EU debt crisis escalates with borrowing costs rising to unsustainable levels. It is hard to see such scenario as a EUR positive…

10. EUR- EU Summit of leaders of the 27 countries in the European Union, Fri., Dec. 9, all day event.

The outcomes of the EU summits in the last couple of years have a common thread- they all tend to remind us of Naked Eyes’ hit from 1983, as the markets around the world expect to see comprehensive solutions to contain the euro-area sovereign debt crisis but all they get are “promises, promises”. Will it be the same this time? Despite of the previous summit’s glimpse of hope that EU leaders have finally realized the seriousness of the situation after about 2 years since the beginning of the crisis, there are many murky details in the recently proposed strategies, some of them named “yesterday’s solutions” by Financial Times. The list of unanswered questions includes: how will EFSF be leveraged; can politicians effectively persuade the ECB to stand as a “lender of last resort”, or will that role be given to the IMF, or a newly-created European Monetary Fund; will EU members be willing to “sacrifice sovereignty in exchange for providing the economic and monetary union with a structural credibility”? Ahead of the last summit, “better late than never” optimism helped the euro register its biggest rally since March, 2009. Although another “hope rally” in the days leading to this summit would be sure to give the single currency a boost, the pressures on the euro could quickly mount if EU leaders fail to deliver the concrete and bold measures needed to win the debt crisis battle.

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