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Quick FX Market Comment: Euro

Overall, the currency world wants to sell euros and ask questions later.  The big drop on June 21^st cast a pall on the euro and it hasn't recovered since that time.  While EUR/USD had an outside reversal on Friday, it has since disappointed and put in new lows every day this week.  For those of you still long, I would keep your stops around 1.2425.  Taking a step back, the EUR/USD remains well within the 1.2285-1.2825 range it has had since mid-May.  But we are falling down to the lower end of it as there is no current hope that this week's EU leader summit will produce a meaningful step towards solving the fiscal union question.  I still believe the establishment of a banking union and the ECB receiving authority to regulate banks is the best that can be expected.  It would be a meaningful step down the path of stabilizing the European financial system.   

US Congress taking the path of least resistance again 

For those of you who listened to my June 6^th conference call, I stated that there was a growing probability that the US Congress would punt the entire fiscal cliff issue into 2013 to allow a new Congress to deal with the issues.  Today, Bloomberg reports that this probability is growing... 

Congress and the President are running the country on a quarter-to-quarter basis and that is not providing certainty for U.S. businesses.  How can the private sector invest in new plants, new ventures or new hires when politicians can't tell them what the rules are for taxes and investment for 2013?  It should surprise no one that U.S. corporations hold over $1.2 trillion in cash equivalents on their balance sheets due to this environment.  It should surprise no one that U.S. banks hold over $1.4 trillion in excess reserves at the central bank due to this environment.  It should surprise no one that private pension fund cash and US Treasury holdings are at all-time highs due to this environment.  It would surprise everyone if there was leadership to compromise to solve the fiscal cliff in a meaningful way...

But I guess that's why we have elections...