Germany and France may agree to EFSF leverage, EUR/USD breaking 1.3800

On Tuesday (October 18), the New York session rebounded sharply from the day's low of 1.3650, breaking 1.3800 to 1.3815 in late trade. New York session, US PPI data and NAHB house price index higher than expected boosted stock market gains, risk sentiment improved, late in the “Guardian” said that France and Germany agreed to expand the bailout fund to 2 trillion euros, Euro/US dollar boosted sharply higher .

During the Asian period, data released by the National Bureau of Statistics of China showed that China’s gross domestic product (GDP) rate rose by 9.1% in the third quarter, and the data was less than expected. This indicates that China’s economic growth has slowed down significantly, and the market’s risk aversion has recovered.

Coupled with the speech of German officials on Monday (October 17th), the market raised concerns about the debt issue in Europe. At the same time, Moody's warned that the possible downgrade of the French rating will undoubtedly aggravate the market's worries.

At the end of the Asian market, the euro/dollar fell sharply. After Germany announced the ZEW economic index in October, the euro/dollar fell to a daily low of 1.3650.

Data released in early morning in New York showed that the US producer price index (PPI) rose by 6.9% in September from a rise of 0.8% in September, and rose by 6.4% from a forecasted monthly increase of 0.2%. The monthly rate of increase in PPI in September has been set since April 2011. The highest; after the release of US economic data, the reduction in U.S. 30-year Treasury bond prices, US stocks bottomed out, and the EUR/USD rallied from 1.3650 to a low of 1.3700.

In the midday of New York, there were no major setbacks in the minutes of the Fed meeting. Bernanke's remarks were renewed and the market conditions were not greatly affected. Bernanke said that the use of monetary policy should not be ruled out as an aid to the possibility of entering a stable goal. The crisis has expanded the range of tools the Fed can use, but the overall framework has not changed.

"The Guardian" reported that it was late in the New York session. According to the British "Guardian" report, France and Germany agreed to expand the size of the bailout fund to 2 trillion euros. The risk appetite has been greatly boosted. US stocks have expanded to more than 2%. The EUR/USD climbed sharply from the 1.3740 line to the intraday high of 1.3815.

However, afterwards, Dow Jones Newswires refuted reports from the British newspaper The Guardian. Market sources said that the report on the expansion of the EFSF to 2 trillion was completely wrong. The EU also stated that there will be no EFSF-related agreements before Friday, and the scale of 2 trillion euros will oversimplify the issue.

After the Guardian’s news was clarified, the euro/dollar fell sharply to around 1.3750.

A spokesman for the German Prime Minister refused to comment on the British newspaper "The Guardian", but said that Germany and France are holding talks on strengthening the EU rescue fund. A Merkel spokesman said that France and Germany seek to maximize the efficiency of the use of the EFSF.

Analysts believe that the financial health of the euro zone is not willing to spend more money on debt-prone countries. In particular, the efficiency of the use of EFSF funds needs to be increased. The current possibility of its leverage is not without. People's attitudes can also get some information.

From the four-hour chart, the euro/dollar's sharp fall has broken the upward trend line that has been formed since the beginning of October, but the decline has clearly supported the 1.3650 line in the previous support.

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