ForexSpace.com - With Europe's markets heading upwards - the FTSE 100, the DAX and the CAC all having climbed - forex traders have also been seeing the markets bounce on the Bank of England having taken no further QE moves. Investors seem to be gaining a crumb of comfort that the BoE’s MPC see the economy as stable enough without it any more money printing – at least for the time being.

Ashraf Laidi, chief global strategist with City Index, says the current bounce in risk appetite at the expense of USD is here to stay, “…but for how long? And will it be followed by a 100-pt consolidation until the next barrage of policy solutions?”

Eurodollar has stirred itself to session highs as more stop loss chasing through the next 1.2625 trigger level got going, clearly influenced by comments from Angela Merkel that Germany is ready to back the use of Euro-area instruments. The German Chancellor -speaking a few moments ago with UK/Norwegian leaders - appeared to be signaling her country’s readiness to back the use of Euro-area instruments.

However, market chatter has now woken up to the fact that Merkel talked only about a ‘willingness to use already established instruments’ that cover the euro zone, NOT to back euro-area instrument, which is not the same. Hence EURUSD sank back down on the clarification. Reuters News has just posted this transcript of Merkel’s exact words: “It is important to stress again that we have created the instruments for support in the euro zone and that Germany is ready to use these instruments whenever it may prove necessary. That is a clear expression of our political willingness to keep the euro zone stable”.  

Frau Merkel also urges people to be patient with respect to the EMU crisis, which she believes will take a few years to resolve! She also insisted that no single response will solve the crisis, whilst noting that Europe's aid for Greece currently stands at around 150% of GDP.

If it transpires that Merkel is talking Eurobonds, expect sentiment to pick up further still as glimmers of hope start to surround the otherwise gloomy Spanish/Greek backdrop, with talk of a rescue for Spanish banks and the earlier China rate cut all moving things in the right direction... more or less!

Drew Hillier. Editor