Nobody could have foreseen this, nobody, certainly not the vacuum tubes who took the S&P for a ride for nearly 150 points. As Reuters reports, "the euro fell to a session low versus the dollar on Monday after comments from German Finance Minister Wolfgang Schaeuble saying the EU summit would not present a definitive solution to the euro zone debt crisis prompted investors to sell the single currency." No, that's not true, it's impossible. You mean all those hopes... Dashed? "A Bundesbank report saying the German economic outlook had deteriorated further also curbed some of the market optimism that had helped push the euro to a one-month high earlier in the session. The euro hit a session low of $1.3824 before recovering slightly to last trade down 0.3 percent on the day at $1.3840." And since the EURUSD and stocks trade as one... You know the rest.
More, for whom this comes as a total shock:
The euro was last down 0.3 percent against the dollar at $1.3836 after Schaeuble's comments, which dented optimism after the weekend's G20 summit that EU leaders would decisively address the region's problems On Oct. 23.
The single currency earlier hit a one-month high of $1.39148 on EBS trading platform but faced resistance ahead of $1.40. Analysts said a break above there was possible, with some investors wary of selling the currency in case of a positive outcome at the summit.
"The euro will probably go above $1.40 as we go through this week, but we could see a 'buy the rumour, sell the fact' response next week," said Steve Barrow, head of G10 currency research at Standard Bank.
"My bias would be to sell into any strength, but not aggressively".
Traders cited offers ahead of $1.3930 which could halt the euro's advance towards $1.40 near-term, followed by technical resistance at $1.3937 -- marked by a couple of daily highs hit in September -- then at its 55-day moving average near $1.3952.
The euro has recovered strongly since hitting a nine-month low around $1.3145 on Oct. 4, but its recent gains have left it vulnerable to a pullback if investors become worried EU leaders may not be able to contain the debt crisis.
"Generally investors would rather be long dollar and short euro and would be quick to reset those positions," said Niels Christensen, currency strategist at Nordea in Copenhagen.
Merkel added fuel to the fire, via Bloomberg:
Germany said European Union leaders won’t provide the quick ending to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.
German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a news briefing in Berlin today.
Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of the emerging plan to avoid a Greek default, bolster banks and curb contagion. They set the Oct. 23 summit of European leaders in Brussels as the deadline for it to be delivered.
On the summit agenda is how any recapitalization of Europe’s banks “might be carried out in a coordinated way” and how to make the European Financial Stability Facility, the EU’s rescue fund for indebted states, as effective as possible, Seibert said.
Oh wait, they had no problem with the EU Summit 150 ES points, or 800 EURUSD pips ago, eh?
And lastly, confirming that the EU is a total circus where everyone is now talking independently of anyone else, we just had that other EU unelected dictator, Barros, saying that the EU must solve the debt crisis to restore confidence. So, since there is no solution, there is no confidence?
What a truly novel concept...