No news is positive news?

If knowledge is power then lack of it must be fear. This is the assumption of many economic writers who claim that the trickle of information surrounding the European sovereign debt crisis has magnified the reactions of investors tenfold. To a degree they may have a point, the expectations and hopes that Greece may or may not default seemed to go on for an eternity, or at least an entire summer. It would only seem proper that the official announcement would therefore be made after an incredibly quiet weekend following a week where information had been scarce, particularly unforthcoming and mainly based on rumour and speculation regarding the German vote to expand the . Needless to say, the markets reacted accurately, with suspicion and fear.

Olli Rehn

So the news today, that the European Union Economic and Monetary Commissioner Olli Rehn has been making noises about a coherent and coordinated strategy to manage the regions debt crisis, was met with open arms by investors desperate to know what the plan is. This afforded the euro a break from its recent decline and gave the optimists a chance to indulge in this scrap of information. Alongside this, speculation is rife that a second aid package to Greece may be being discussed behind closed doors. If either of these particularly light pieces of information can claim to have prevented further decline in the euro it would also have to have something to do with the USD and its falling demand. Based on better than expected ISM Non-Manufacturing PMI figures, the return of risk appetite with the rise in the S&P500 put pressure on the USD.

From a technical perspective the EUR/USD still looks over-sold, and there is a divergence forming in the MACD indicator, but this has the potential to continue for a long time if the speculation of coordinated strategies and financial packages fails to materialise. The Euro is in a decidedly difficult position, caught between technical signals that it is due to rise and fundamentals which have the potential to push it far lower. The fact that even the smallest glimmers of hope are being taken into consideration and impacting the Euro positively suggests that, in the short-term at least, and short of any further negative news it is far more likely to strengthen against the dollar than to weaken.


As risky assets become popular with the lack of negative news, as opposed to rising with positive news it gives an interesting indication into the psychological health of the markets. This situation, where rumour and hearsay are being pounced on, reflects a demand amongst speculators (especially technical trades) for a reasonable correction to occur. Looking at oil, its rise today on the back of the positive S&P500 trading tells a lot about the existence of risk appetite and, perhaps importantly, that a lot of risk averse information is already factored in to the markets. The US non-farm payroll figures on Friday are expected to be negative and when negative news is highly anticipated anything slightly positive will cause an overreaction as seen in the Euro today.