Wise money markets digest euro non-deal

The “euro survival package” produced by EU officials on Friday has not lived up with the high expectations before the EU Summit. Wise money markets digest euro non-dealHowever, production of a fiscal compact, the stepping up of the European Stability Mechanism (ESM) to July 2012, no compulsory private sector involvement in debt reform and a possible boost to the IMF of up to €200 billion, are all positive moves.

The fact that David Cameron has decided to reject a joint tender to revise the EU Treaty should not detract from the steps forward made.

Nevertheless, the methods may not be adequate to calm market worries, with frustration at the lack of European Central Bank (ECB) response in terms of stepping up to the plate as “lender of the last resort” still weighing heavily on sentiment.

Data could add to the disappointment this week as “flash” Eurozone purchasing managers indices (PMI) fall further this month.

Over to the US and under the spot light this week will be the Fed’s FOMC meeting, November CPI and retail sales data plus manufacturing confidence gauges with November industrial production too.

It’s unlikely the Fed will change its policy stance at this time however the language may sound a little more positive on the economy based on recent headline data.

Inflation will likely remain subdued while the other data will continue to indicate a steady recovery.

As we approach the Christmas break liquidity is likely to thin further, with ranges likely to dictate without of little directional force.

The single European currency will probably struggle to make much advancement in current market conditions.

Many facets of the EU treaty still need to be clarified to help secure market confidence again.

Expect EUR/USD to trade 1.3260-1.3550 over the short term before Christmas.

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