The German constitutional court will give down a ruling on Wednesday as to whether the German contribution to any European bail-outs is unconstitutional or not. The presumption in the market for many weeks now has been that the court will rule that the Bundestag should have much more of a say in all bail-out conditions. Such a ruling would likely appease coalition partners in the FDP and CSU but would probably mean that Frau Merkel needs support from the opposition SPD in order to pass her legislation. This support has looked likely (bill is due before Bundestag in late September) but opposition against the EFSF is growing amongst the German populace, with up to 2/3rds now reportedly opposing any new bail-outs.
I’d expect the EUR to stay heavy until this risk event passes.
