Euro Bull Charge Runs Out of Steam
Posted on July 4, 2008
Filed Under EUR/USD, Fundamental Analysis |
The Euro bull charge was stopped dead in its tracks yesterday with the daily euro vs dollar chart ending with a large bearish engulfing candle. This downturn has been despite the ECB raising rates to 4.25% and poor nfp numbers. In forex a hike in interest rates is usually seen as positive for a currency so why has the market appeared to turn against the euro?
The reasons given have ranged from the market having already priced in the rate hike to less than hawkish rhetoric from Trichet. As has been mentioned in previous posts internal political tensions within the eurozone are now widely accepted (French President Sarkozy specifically asked the ECB to consider the implications of any rise), yet the Frankfurt based Bank went ahead anyway.
Today is America’s Birthday and the markets will, of necessity, be thin and difficult to guage. In addition there is a G8 summit meting so it won’t be until the early part of next week that we can judge whether this fall back is merely temporary or a sign that despite all the ECB tough talk the market has sensed that the divisions within the EU are just too deep and, more importantly, much too public.
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