German ESM Ruling: Reaction

Now that German courts have given the greenlight the ESM, we shall take a look at how the market has reacted.

EUR/USD M15

DAX30 M15

XAU/USD M15

BCO/USD M15

Key takeaways:

Prices have rallied predictably on the back of ESM ratification. However a few questions remain

– Will Italy and Spain apply for bailout funds under ESM?
– Will the amount in ESM be enough to save Euro-zone?
– Will there be another need for parliamentary approval since German Courts has ruled that German liability to the ESM must not exceed €190bn without asking the Bundestag for approval.
– Will German courts consider the Outright Monetary Transaction (OMT) a violation of German sovereignty?

Using the last big EU/ECB news as reference (OMT announcement), we could potentially be see inactivity while the European traders digest the news and weigh all the unanswered questions. Perhaps we may only see a strong rally/sell off during US market opening.

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