Forgive me; I still find it difficult to work up much enthusiasm about European Union summits.
Euro players seem to agree. The rate versus USD is flagging today after its strong recent run.
And at the end of a week in which the ECB’s President Trichet decided he’d hardened up his anti-inflation rhetoric enough, plus as the latest EU summit ends with a whimper, forex players likewise lose their recently-regained enthusiasm for the euro.
I realize my view on the EU summit probably exposes my own prejudices – but in my defence I stress I have no political axe to grind against Europe – I love the spirit, the people and its broad regions – and I’m neutral on the euro.
The Bloc’s politics don’t help by being opaque, protracted and having the whiff of being out of tune with The Bloc’s individual members, not to mention its citizens.
I get the impression this is the standard view in this City [yes, maybe it’s just the professional view most Citizens adopt] – moderately laissez faire; just looking for the headlines and market stimulus, then stop reading before boredom or irritation sink in.
This week’s summit which has is just winding up, is a case in point.
The European Union will agree to make concrete proposals on how to strengthen the European Financial Stability Facility – the ‘bailout fund’ – while at the same time asking the group’s president to work out the details of a permanent bailout mechanism by March – judging by draft conclusions of the meeting.
This is the ‘action’ decided after a year which threatened to wipe-out the euro.
It’s true; institutions do not usually act quickly. But the feel of the ‘action’ itself at a granular level seems to speak of the Bloc’s lethargy and inability to act decisively.
And a string of meetings last year of various officials of the euro zone produced similarly bland statements and, err actions.
On that basis, whilst the immediate threats to at-risk sovereign states appear to have passed, my view remains this: it’s probable that the broad issues and inherent risks have merely been pushed further out.
“The agreement to agree by next month is likely to leave the market disappointed given the hope of swifter action” BNP Paribas’s foreign exchange strategist’s team wrote today.
“We have switched our short term strategy for EURUSD back to selling rebounds. We now recommend using rebounds to 1.3760 to establish short positions,” BNPP added.