Euro Advances the Most Since October 2011

Published by Filipe R. Costa on Fri, 11/01/2013 - 10:53 in


Euro, ECB, Draghi
Mario Draghi

Daily Market Commentary for January 11: Mario Draghi’s attempt to shift focus from the financial crisis to the real economy sent the Euro higher 1.62%, a rise not seen since October 2011 as measured by our CTS Euro index. Analysts are changing their views on future monetary policy and dropping their bets on a Euro breakup.

Although the financial crisis in Europe is far from being solved as anyone travelling to Portugal or Greece could confirm, the worst of the financial crisis is behind our backs. Even though many bets were placed in the direction of a Euro breakup, truth is the odds for that happening are now very low. Focus is clearly shifting to the real economy, which is struggling to grow due to the excessive austerity measures that have been applied during the last few years.

Comments from Draghi at the ECB press conference held yesterday sent the Euro higher by a massive 1.62% as measured by our CTS Euro index. This was the highest rise since October 10, 2011 and the third highest in our database which was created at the beginning of 2011. The continuing uptrend in equities also helped the Euro as the dollar has been pushed down with more and more people seeking for extra risk.

Speaking of extra risk and bullish markets, it seems that every trader is a bullish one right now. That’s a situation which concerns me. When everyone is bullish, it’s too good to be true.

Spread traders aren’t convinced with the bullishness and have been opposing the FTSE rise as reported by Capital Spreads. With FTSE now trading around 6,100, many are convicted the index is in overbought territory. In my view the worst is with US markets which will face difficult times ahead with negotiations on fiscal cliff still to come.