By FX Empire.com
The plan is finally announced and the market met the broad lines with positivity and optimism sending the EUR/USD strongly higher.
The market accepted the efforts and saw the new measures as strong and have the hope to ease the negativity in the market. The leaders said that 50% haircut will be seen for Greek bonds and banks will have to strengthen their capital by increasing the core capital requirements to 9.0% and the EBA said banks need 106.5 billion which was also less than market expectations.
Banks will also be supported by the expanded firepower of the EFSF which will be leveraged to 1.0 trillion euros to guarantee bonds and act as an investment vehicle to finance its operations and lend to nations and banks that need liquidity.
The second bailout for Greece will also be provided and finalized before the end of the year which is also further support to Greece and offsetting the market tension which will protect nations that are liquidity strapped such as Italy and Spain and prevent market pressures from affecting them.
Those measures supported optimism that markets might normalize and the efforts can now be focused to revive growth. Strong US GDP and 2.5% expansion in the third quarter was further support to the upside momentum as investors unwound their recession fears.
With the upbeat expectations the market remains now biased to the upside yet Friday might still see choppy trading and volatility after the rally and with the end of the week trading, especially that the optimism over the European measures might change any second since investors still do not know the means of implementing the measures or their timing which if delayed long enough might derail the progress made.
Also the U.S. economy will end the week with the income report for September at 12:30 GMT were personal spending is expected to rise by 0.6% after 0.2% and income to rise 0.3% after 0.1% drop. The Core PCE is expected with 0.2% on the month after 0.1% and on the year to rise 1.7% from 1.6%.
The week will end with the University of Michigan consumer confidence final October reading at 13:55 GMT and expected to be revised higher to 58.0 from 57.5.
Read more Forex Market Updates here.
