The stabilisation in risk appetite over recent days looks highly fragile and markets will look to upcoming events in Europe and data releases to determine whether a rally in risk assets is justified, writes Mitul Kotecha, head of global currency strategy at Crédit Agricole Corporate & Investment Bank.
Discussions over the weekend between German Chancellor Merkel and French President Sarkozy delivered little in substance apart from a promise that a concrete response to the crisis will be delivered by the end of the month ahead of the 3 November G20 summit.
Both leaders agreed on the need for European banking sector recapitalisation and this issue along with whether or how to leverage the EFSF bailout fund and the extent of private sector participation in any Greek bailout is likely to take growing prominence for markets over coming weeks ahead of the EU summit on 17-18 October. In the meantime, markets may give Eurozone officials the benefit of the doubt but patience will run thin if no progress is made on these fronts.
The US jobs report at the end of last week which revealed...
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Mitul is the author of the forthcoming: Gyrating Currencies (to be published by Searching Finance in late 2011).