The squeeze is on. EURUSD is probably the most extreme example of the squeeze-factor potential of what is at its heart a lot more talk and lot less action. Up almost 250 pips from its pre-summit-statement levels, EURUSD is just under 1.2700 - which in context is only back to 6/21 levels. As we noted on June 3 [7], the epic level of CFTC non-commercial EUR spec shorts were ripe for a squeeze-fest, while on the other hand we specifically said "the pain trade will be any appeasing announcement from Europe." Sure enough we got just that (supposedly) and EURUSD is now up well over 300 pips from those levels as the clear pain trade plays out. The USD weakness has driven commodities higher with Gold reaching $1600 once again (6/21 levels). European sovereigns are (somewhat expectedly given the euphoria - though just how much has actually changed is unclear) also rallying hard on the day but while they have compressed spreads markedly, they have stalled at unchanged on the week (though Portugal remains notably wide on the week). Credit and equity markets in Europe are in sync and have snapped higher to 6/21 levels also (with financials outperforming modestly). Europe's equity markets are all soaring - up 3 to 4.5% - as DAX is now outperforming the S&P 500 on the year once again. Big moves (multiple sigma in bond and FX markets) and yet we can't help but think they were hoping for more than just a retracement of one week's price action.
EURUSD's impressive squeeze strength has torn the USD back to unchanged from 6/21...
[8]
Commodities surging on USD weakness, with Gold touching $1600 (at 6/21 levels)...
[9]
but while sovereigns are clearly improving; on the week they remain wider (with Portugal notably so)...
[10]
and European credit and equity markets are in sync but only at one-week highs...
[11]
Charts: Bloomberg