It Is Eerily Quiet Out Here… – 21st December, Marketplace Update

Article by Vantage FX

Jay Mawji of Vantage FX provides an overview of the activity shaping currency movements on 21st December 2011 – including news around Eurozone as 2011 draws to a close.


“There seems to be news flowing around the markets as the year draws to an end with Europe still the main talking point. Although the ‘drama’ of the Eurozone has escalated in recent days, news seems to be spreading on whispers as opposed to the front pages and squawk boxes. Perhaps it’s the end of the year that’s turning down the tone or perhaps traders and the markets are becoming less sensitive to the Eurozone, as trading psychologists have pointed out.


Today the European Central Bank put on offer €450bn to banks, allowing them to take this cash as a 3 year loan, on the principle of injecting liquidity into the starved Eurozone markets. The ‘capital thirsty’ banks usurped available funds, with over 500 banks snatching a share of the liquidity boost. The demand for such loans was so great that the ECB eventually settled on lending out €489bn to keep the markets happy. The loan is supposed to ease liquidity, however fears grew shortly after that banks would do everything they could to keep the cash on their balance sheets and shore up defences against possible ratings cuts in early 2012. The Euro confirmed these concerns, as ‘short term’ Euro strength was soon replaced by a rapid sale, suggesting that the markets perhaps were still uneasy about trusting the Eurozone just yet. Of course, Sarkozy has suggested the banks use this liquidity to buy ‘rubbished government bonds’, which will ease the sovereign debt pressures as borrowing rates will edge down. The ‘cash for trash’ suggestion appears to be an indirect method of the ECB lending directly to governments, something that Angela Merkel and her German counterparts have opposed.


As the year draws to an end, whilst we pass through the ‘quiet period’, keep an eye on little movements and changes in the Eurozone. These may well be timed to avoid the media spotlight. While I am in no means suggesting any foul or devious play, a slight jigging here and there could lead to a new dawn in the Eurozone, hopefully for the better.


What concerns me more are rumours of a War in Iran looming…”


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