Wise money markets upbeat about euro’s prospects in anticipation of ECB action

Global equities have rallied overnight as the wise money markets have remained optimistic that the ECB will provide further stimulus to the ailing economy along with the Federal Reserve. Wise money markets upbeat about euro's prospects in anticipation of ECB actionThe optimism has come from further weak economic data from Italy (Italian GDP was well below expectations at -0.7% and German factory orders subsiding as well), making it more likely that the ECB may resort to some measures.

It was confirmed that Greece has agreed to the Troika’s reform package, however ratings agency S&P has further changed their outlook to negative as they believe they will need more funds to prevent a further default.

Spanish bond yields moved down 11 basis points yesterday after the Spanish prime minister considered that they may need a bailout.

The dilemma for now, is that in order for them to do so, they need to sign an EFSF memorandum which they aren’t willing to do till they get terms laid out by the ECB.

On the other hand, the ECB is reluctant to lay down the terms until they have the memorandum signed.

The consideration of a possible bailout from Prime minister Rajoy has provided some impetus to EUR-USD which seemed to hold well above 1.2350.

With Mario Monti of Italy also jumping on the bandwagon of considering a bailout, the opposition parties have added pressure on him not to do so.

There are a few concerns that should the ECB not intervene in a timely fashion then the euro could suffer another sell off.

In the US, the positive outlook in the markets continued as the S&P 500 rallied to 1400, which is the highest in the last 3 months.

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