• Going Dutch
• Fight To The Finnish
• Pips Squeaking

Just as the markets took stock yesterday of the EU Summit, Finland and the Netherlands moved to block bond-buying plans, casting the first doubts on the ‘deal’. Forex traders saw this new development arise as data showed a slide in Spain, Greece and Italy's manufacturing activity and a rise in unemployment across the euro zone. However, the Dutch/Finnish objection will not necessarily scupper the plan entirely. While bond buying in the open market should require unanimous approval from all 17 countries across the currency bloc, the likes of Charles Forelle of the Wall Street Journal, who tweeted that an emergency procedure does allow for it to go through with an 85 percent majority, make a salient point.

The start of the week - and the second half of 2012 - has seen overall market sentiment mixed as participants continue to digest the announcements from the European Leaders' Summit and ahead of some key data and events in the coming days. One of the most keenly eyed will be the European Central Bank policy announcement later this week. With policy easing likely from the ECB and the Bank of England, and disappointing ISM data out of the U.S. presaging what is expected to be non-farm payrolls report for June, my forex snouts generally believe some further improvement in risk sentiment and a softer USD is likely.

Simon Denham of Capital Spreads, in opining his view that the ECB will lower its interest rate by 25 basis points, also comments how the greenback benefited from renewed demand for safety as weak manufacturing data across the board triggered fresh concerns of a slowdown in the global economic growth.

“As a result the euro moved 71 pips down versus the greenback to 1.2585,” says Denham. “Along the whole commodities spectrum, gold pulled back yesterday to $1596.9, driven by a stronger dollar and slightly weaker U.S. equities. Investors are still pondering if the European Union has done enough to alleviate some of the immediate worries or if the expected 25 basis points cut in its interest rate will actually satisfy the markets.”

Saxo Bank’s hugely experienced Chief Economist, Steen Jakobsen, comments how it is striking how we are all lost on this crisis. “The mere fact we have to discuss "who won or not" indicates something totally wrong,” Jakobsen insists. “It's not about who wins; the loser at all times is the unemployed, the pensioners and the investors, who do not get anything but extend-and-pretend. The lack of follow through to "better than expected Chinese PMI" to me indicates this week of a big risk to the downside. The U.S. has July 4^th, and "normally" that leads to quiet/rally week,” adds Jakobsen, concluding “but somehow this market is over-complacent and ignoring facts: There are no new plans for the European debt crisis, the US election is not going to bring change but just more of the same, and Asia is barely moving forward with PMI's and new orders at lows.

“The perfect storm is being felt, but at the same time equities is as unloved as ever. How to balance this opportunity versus complacency? Use the low into August/September to add to your position.”

Drew Hillier. Editor, ForexSpace.com