The Euro is poised to have its largest 1-day rise in nearly eight months as E.U. leaders are expected to announce later today that they have agreed to create a common supervisory body which will oversee the Eurozone’s banks and permit them to recapitalize directly via the EFSF and not through governmental channels. The goal said Herman Van Rompuy, the E.C. Chairman, was the creation of a mechanism which would break the sometimes vicious circle between the Eurozone’s sovereign governments and their respective banks.
One analyst said that that was well beyond what markets had been expecting, and might be just enough to whet risk appetite in the financial markets. Players may still consider exercising caution until after the announcement makes the plan official; as one currency strategist put it there have been several instances when leaders who supposedly were in accord came out of a meeting to only tell of disagreements.
As reported at 11:18 a.m. (JST) in Tokyo, the EUR/USD surged 1.2% to trade at $1.2588, well off the $1.2407 low struck yesterday. The Euro also surged against the Yen, trading 1.2% higher to 99.97 Yen, again off the low of 98.37 Yen of yesterday. The Yen is finding support against the greenback, however, as Japanese exporters sold off U.S. Dollar holdings ahead of the quarter-end.