Forex - The European Crutch is breaking

Posted by Forexsq 722 days ago (http://forexblog.oanda.com)
img forexsq - With Obama winning a second term has increased expectations that the Fed will maintain its loose monetary policy for the foreseeable future. This has allowed Global equities to climb, US treasury to rally, the price of the yellow metal to surge and mighty dollar to fall. How long is this bout of risk trading to last? A critical vote in Greece on new austerity measures and structural reforms could deflate any new EUR confidence later today. Let’s not forget the US’s Fiscal Cliff, it too is expected to dominate the first few month of Obama’s new term. Despite initial market reaction of risk-on, the proximity of the Cliff will dampen most buoyant of moods sooner rather-than-later, not allowing risk to gather a great deal of traction this time around.

Many expect the single units recovery to be short lived. The clear result of the US election has certainly boosted pro-cyclical currencies; however, it’s anticipated that the ‘water’ will be muddied by various political European antics. First up will be today’s Greek vote on its own austerity and reform package. The markets expect the vote to scrape through, as well as the more important budget vote on the weekend and again, this outcome is expected to be very close. forex

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