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Sarkozy-Merkel Press Conference Sparks Euro Volatility

Sarkozy-Merkel Press Conference Sparks Euro Volatility

2011-08-16 17:15:00
Christopher Vecchio, CFA, Senior Strategist
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French President Nicolas Sarkozy and German Chancellor Angela Merkel held a joint press conference today at 16:00 GMT after meeting to discuss various ways to reform the Euro-zone in order to return stability to markets. The EUR/CHF was quite volatile in the minutes during the press conference, trading in a 75-pip range over the course of the 16:00 GMT hour, though remained unchanged at the conclusion of the respective sound bites.

EUR/CHF 1-minute Chart: August 16, 2011

Sarkozy-Merkel_Press_Conference_Sparks_Euro_Volatility_body_Picture_10.png, Sarkozy-Merkel Press Conference Sparks Euro Volatility

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Presented below are the highlights of the press conference:

  • France and Germany propose European Union President Herman Van Rompuy to head a “Euro-council.”
  • Sarkozy: France and Germany will propose a financial transaction tax in September.
  • Sarkozy: Germany and France are working on “ambitious” joint proposals to defend the Euro.
  • Sarkozy: The two countries share an “absolute determination” to defend the Euro.
  • Sarkozy: Aim is to reduce debts and deficits among Euro-area member states.
  • France and Germany aim to harmonize corporate taxes from 2013.
  • Merkel: Stronger Euro needs stronger economic ties among member states.
  • Merkel: One “big bang” won’t solve Euro-debt crisis, sees a “new phase” in work on Euro-area.
  • Merkel: Debt brake to be anchored in French, German law.
  • Merkel: European Union debt rules must take priority.
  • Merkel: European Union structural funds must focus on boosting growth.

While the EUR/CHF retraced its gains falling below 1.1400 once more, American equity markets did not find that initial boost on the news. Indeed, the three major indices traded lower after the commentary failed to instill confidence among market participants. The S&P 500 was hit particularly hard, falling approximately 20-points thereafter.

S&P 500 1-minute Chart: August 16, 2011

Sarkozy-Merkel_Press_Conference_Sparks_Euro_Volatility_body_Picture_7.png, Sarkozy-Merkel Press Conference Sparks Euro Volatility

Charts created using Strategy Trader– Prepared by Christopher Vecchio

Volatility appears to be picking up again, especially in light of disappointing German growth figures that necessarily suggest the European Central Bank’s series of rate hikes were particularly ill-advised, considering broader economic weakness not only in the Euro-zone periphery countries, but on a global scale as well. Volatility will likely remain high, particularly among Euro- and Franc-based pairs, as the Swiss National Bank is expected to announce whether or not they will peg their currency to the Euro tomorrow. Such an event would have an effect of tremendous magnitude on the currency markets – for better or for worse.

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

Follow Christopher Vecchio on Twitter: @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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