A little optimism

Posted by on Jul 25, 2012 in Featured, News

A little optimism

Optimism in the markets seems as rare as sunshine in a British summer this year. But as the sun comes out, the temperature soars. Phew, it’s hot right now.

The same is true with optimism and the Euro. A few comments this morning about changing the status of the European Stability Mechanism (ESM) by an ECB council member sent the Euro soaring as well.

Ewald Nowotny suggested the ESM could be classified as a bank, although no formal discussions have taken place with this objective. The optimism from this simple statement had the Euro appreciating fast against the Dollar.

Why does this make a difference? It means the ESM could then raise funds from the European Central Bank (ECB). It would then have, in theory, enough money to bail out Spain and still have some petty cash for Italy, another round for Greece, Cyprus, Slovenia and any other member state running into trouble.

Presumably last months statement about central bank supervision of national banks could be extended to ensure the ESM is managed by the ECB. Thus creating more liquidity for governments with lopsided books, you know the sort, the books that don’t quite balance.

It is this underlying desire to see some kind of a fix that will work and salvage the Euro that provides many trading opportunities. In spite of a little sunshine today, remember it’s been a very wet, cloudy, cold and miserable summer so far.