EUR, DJIA Bounce Back On Fiscal Cliff Trade

Following comments by major party leaders and the US President, both the Euro and Dow Jones Industrial Average bounced back from previous losses in the session. For the Euro, it was a bounce back off of support at 1.2880 (or about -60 pips on the day), with the US equity benchmark index recovering from an earlier loss of over 100 points, now positive by approximately 70 points.

The crux of today’s bullish recovery stemmed from comments made by President Obama in Washington. Speaking in a scheduled press conference, the President noted that the Fiscal Cliff crisis would be averted – with policymakers potentially close to a deal that could surface before the end of the year. The sentiment was echoed by earlier comments made by House Speaker John Boehner, even though both sides are still at odds over reductions in spending and revenue contributions. Nonetheless, it seems that both parties are working in tandem to effectively end the current situation quickly and amicably.

Averting the Fiscal Cliff is anticipated to be in the best interest of the world’s largest economy – as activation of the cliff is expected to sap almost 1.5% off annualized gross domestic product and raise unemployment to an average of 9% according to Congressional Budget Office estimates.

Ultimately, the sentiment is helping to boost the single currency heading into afternoon trade, adding to positive sentiment established earlier by a Spanish bank bailout. European Union leaders announced the disbursement of $52 billion in aid for Spain’s flailing financial system, allowing the funds to be disbursed in conjunction with certain conditions.

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