The EUR/USD came under heavy pressures after Draghi reiterated his commitment to the treaty and assured the ECB is not in anytime soon ready to start massive bond buying or quantitative easing.
The central bank cut rates as expected to 1.0% and added 3-year loans while lowering the collateral requirements alongside lowering the reserve ratio to 1.0% from 2.0% to increase liquidity for banks and attempt to support growth.
Nevertheless, the market was disappointed by the downbeat outlook for GDP growth with strong downside revisions and also the commitment to avoid wide scale bond purchases and kept the focus on the need for governments to take the needed action and said the fiscal union that the leaders will discuss at the summit is the right way to go.
Disappointment and jitters again entered the market with the eyes left to focus on the EU summit that starts with a late dinner on Thursday and continue the heavy negotiations on Friday. The treaty change is dominating the agenda and what the EU will final agree on a united front to fight the crisis or rather a euro area fiscal union will be emerging on its own.
Investors need a roadmap a strong reaction to the EU crisis and not just the treaty change which investors hoped will be the key for the ECB to step up the help yet after Draghi’s comments the market even scaled down on the bets or on major surprises.
Choppy and volatile trading will be evident with eyes on Brussels on Friday for major decisions to be made to contain the crisis as the market held till now and accordingly need something to sustain the euro from a slump and a failure to deliver anything will send the euro drastically lower and intensify the market pessimism over the coming period.
Germany will start the session at 07:00 GMT with the Trade Balance figures for October, where the Trade surplus is expected to narrow to 15.0 Billion euros compared with the previous of 17.4 billions, as Exports are expected to drop by 1.0% from the previous 0.9% expansion, while Imports are expected to expand by 0.1% from the prior 0.8% drop.
The German Current Account could have narrowed to 14.0 billion euros from 15.7 billion.
Germany will also released the consumer price index for November in a final reading, where the annual and monthly CPI indexes are expected unrevised at 2.4% and 0.0% respectively, while the Harmonised CPI annual and monthly indexes are expected to remain unchanged at 2.8% and 0.0% respectively.
The United States will join the session at 13:30 GMT with the Trade Balance figures for October, which could have narrowed slightly to $13.0 billion from $13.1 billion.
At 14:55 GMT theUnited Stateswill end the week with theUniversityofMichigan Confidencefigure for December in a preliminary reading, where the confidence is expected higher at 65.5 compared with the prior of 64.1.
**European LeadersSummit**
Originally posted here
