By Cliff Wachtel: Markets anticipate a last minute deal before year end that once again defers most of the austerity measures to a later date. If so, it will have a double benefit for the pair.
  • It boosts risk appetite in general: good for the EUR, bad for the USD
  • It specifically strengthens the pair because of the implied continued weakening of the USD via rising deficits and ongoing forms of money printing
Note that if Washington fails to reach a deal, expect the opposite result:

Severe risk aversion as the largest economy is likely to contract (bad for the EUR)

Significant reduction in the US deficit and USD printing to fund it, boosting (good for the USD)

2. FOMC MEETING: EXPECTED RESULT POSITIVE FOR EURUSD

The Fed is expected to maintain its overall stimulus. Even though operation twist expires, the FOMC is expected to expand QE 3 mortgage bond purchases by


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