5 Holes In The EU Summit Agreement

This late night European Union Summit had some achievements. France, Italy and Spain insisted on focusing on measures for the current crisis, and not only long terms visions. The leaders agreed on allowing the bailout mechanism to directly recapitalize banks – a move that allows lifts the burden off Spain. In addition, the ESM will have no seniority, thus expected not to scare off private investors.
Spanish yields are falling and EUR/USD reached high resistance before retreating. Will this rally last? Or is this another short-covering rally like the post Greek election rally and the post Spanish bailout rally? Let’s see the decisions:

1. Bank Recapitalization by ESM – it could happen: The word “could” is important to note. This is not decisive enough. There are additional conditional words in the statement.
2. Dependency on a supervising mechanism: Direct bank recapitalization depends on establishing a body that will supervise over the banks. Germany insisted on this. While it makes sense, this slows down implementation and is contradiction to the urgency also expressed in the statement.

Read more: http://www.forexcrunch.com/5-holes-in-the-eu-summit-agreement-eurusd-rally-endangered/#ixzz1zAwgM5Cp