The euro is rallying on short-covering with risk-aversion easing after upbeat US durable goods data and fading hopes for QE3 to be hinted at at the upcoming Jackson Hole symposium.
No QE3 is a big problem for gold, which is based on the “currency debasement” play, but its a mixed bag for the currencies. The dollar tends to under perform in the run-up to QE being launched while strengthening once the policy is put in place.
Part of the euro rally in recent trade is on the rebound in US equities and in Bank of America in particular, which is up 9% today. At some point, that should be outright dollar bullish, one would suspect. Also bullish for the dollar would be the market’s conclusion that the US economy does not need QE3. We may be in the early stages of that now.
We’re hearing now that a US consulting shop has put out a bearish piece on the ECB. No details yet. Markets have a small easing by the ECB priced in now over the next twelve months.
More stops above the market, we hear, at 1.4490 with a mix of stops and sell orders in the 1.4500/10 area.
