Merkel will announce a ban on naked short-selling of stocks and European government bonds tomorrow, coalition sources tell Reuters.
EUR/USD is slumping to fresh US lows, triggering stops below 1.2340 on the news.
Markets were calming down on their own, making markets wonder why the German government is taking this step at this time. Is there another shoe to drop? Inquiring minds want to know…
Short-sale bans on shares have been used as temporary measures in the wake of the Lehman collapse but this is the first ban on the sale of government bonds. It is a big negative from a macro perspective for reserve managers who want big, deep, free capital markets in the markets in which they invest. IF this is more than a temporary measure, if could be a major euro negative.
EUR/USD trades now at 1.2332.
