The euphoria emanating from last week’s eurozone agreement will likely fade into this week as renewed doubts creep in.
Details of how the EFSF bailout fund will be leveraged or how the special purpose vehicle will be utilised have yet to emerge while the firewall to protect countries such as Italy and Spain may still be insufficient given that the use of the European Central Bank (ECB) to provide unlimited support has been ruled out.
With more questions than answers markets will be hungry for further details over coming weeks and until then it is difficult to see risk appetite stretching too far.
One indication of such concern was the fact that Italy’s borrowing costs climbed to euro-era highs the day after the European Union (EU) plan was agreed. The G20 meeting on 3-4 November will be eyed for further developments as well as further reaction to the EU agreement.
There are plenty of events to digest this week that could add to any market nervousness...
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Mitul is the author of the forthcoming - Gyrating Currencies (Searching Finance 2012)