We’ve seen a very strong risk-on rally today and there were three main drivers in my opinion; the earlier reports that the IMF would bail-out Italy to the tune of EUR600 billion, the strong retail sales performance in the US on Friday, and finally a sense that France and Germany might be stumbling their way towards some sort of a solution and/or compromise.
The middle reason remains relatively unchallenged (though I’m not sure it’s a good reason to be going short USD). The third reason is wishful thinking and we’ve been here before. The first reason is seemingly total rubbish and I’d love to know firstly where the story originated and secondly where the IMF was supposed to find EUR600 billion lying about.
Ergo, if nothing changes and we get another rally in Europe in the EUR/USD, back towards 1.3420ish, then I’ll consider shorting it (or buying USD/CHF).
