- After working late into the night, EZ leaders announced a EUR1 trillion+ EFSF fund and an agreement with banks that they should suffer a 50% drawdown on Greek debt
- Merkel and Sarkozy personally drove negotiations
- Still some outstanding issues such as Italian pension reform which has to be enacted
- EFSF should be in place by end of November; Greek 2nd tranche by end of year
- Sarkozy to speak with Wu Jintao this morning regarding Chinese investment in EFSF
- Japanese retail sales -1.2% YoY
- South Korea GDP +0.7% QoQ
- Regional bourses +1%; Gold $1726/oz
EUR higher and risk on was the outcome after the EU summit worked really late into the European night to finally come up with a working framework. Some work yet to be done but the signs are good and the market has taken all developments as a step in the right direction.
EUR/USD spent the majority of the morning session trading below 1.3900 with the market unsure how to take the lack of developments as midnight approached in Europe. Reports that the banks were playing hardball on the haircut increased bearish sentiment. It was somewhat of a surprise that an announcement should be made at about 3am European time. EUR/USD immediately triggered stops above 1.3925, settled between 1.3940/60, and then accelerated again only to pull up ahead of barrier protection at 1.4000. Pullbacks have been limited to 1.3940 so far. Range: 1.3863/1.3993
AUD/USD also benefitted from the improved risk sentiment and it followed the EUR/USD almost to the letter, also pulling up ahead of presumed barriers at 1.0500. Ranges: 1.0380/1.0490
USD/JPY 75.96/76.28; Cable 1.5952/1.6034; USD/CHF .8758/.8824
