The European Commission said on Thursday that it would approve the Italian government’s cash injection for the troubled lender Monte Paschi di Siena. It is not a bailout (for that would be prohibited by EU rules) it is “liquidity support” to tide it over a difficult patch. Investors had been fairly confident that, true to form, the EU would be able to cobble together a rescue for the bank so there was no reaction by the Euro.
Coincidentally, hours after the rescue was announced the Euro leapt 1.5% higher before settling back. The move was driven by “algorithmic” computerised trading models when the Euro moved up through US$1.05. It contributed to a weekly gain of one and a quarter US cents for the Euro and it was up by two and a third cents against Sterling. For calendar 2016 as a whole the Euro is up by 14% against the Pound and it is 3.5% lower against the US Dollar.
Despite the Dollar’s Trump-inspired Bull Run its performance in calendar 2016 has only been a little better than average among the dozen most actively-traded currencies. It is up by 25 1/2 cents against the Pound, 17.1%, and it is just four cents higher against the Euro. 3.6%. Over the week the Dollar is a cent firmer against Sterling and a cent and a quarter lower against the Euro.
With the Christmas weekend getting in the way, a seasonally thin market and a shortage of tradable economic data there was little to stoke the Dollar’s fire. Its sole bit of excitement came on Thursday night when it slumped -1.5% against the Euro. The downward spike (or more accurately the Euro’s upward spike) appeared to have been caused by computerised trading models, which leapt in to buy the Euro when it broke up through $1.05. There was no follow-through and within a few hours the move had been neutralised.
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