It was generally a good day for the EUR/USD as the correctional wave took control of the market and the weak dollar with the absence of U.S. markets supported the battered euro to recover some losses.
The euro was buoyed by steady Germany growth at 0.5% expanding from the previous quarter and also better than expected IFO confidence figures that eased some of the jitters.
The sentiment is rather the same yet the correction is what we can call it now as the low volume and absence of U.S. traders helped in the recovery.
On Friday we still expect choppy trading with low volume prevailing as U.S. markets will return but only with a shortened session and early closing, where the clearing of transactions after the Thursday holiday will keep the fluctuations evident.
We do not have any fundamentals queued for release on Friday yet eyes will be on any outcome from the meeting between Sarkozy, Merkel and Mario with updates on the current abysmal situation. The market already ignored somehow Fitch’s downgrade for Portugal to Junk yet the next step by policy makers can make it or break it, especially as the leaders might debate the ECB option as conditions worsen and delay on the EFSF is clearly aching markets to the extent it is now somehow starting to be seen as overdue.
We also have a new Italian zero-coupon auction which will be watched not for demand and for the discount on the bond and whether we will have another major disappointment like Germany’s earlier in the week.
Originally posted here
