How EUR Could React to Irish Bailout

Date November 12, 2010

A great deal of discussion has been had about whether or not Ireland needs a bailout. However as currency traders, what is important to us is how the euro could react if the speculation becomes reality and history can be particularly useful for this purpose.

Greece received a record breaking bailout the weekend of May 2nd . On the first trading day after the bailout announcement was made, the EUR/USD plunged 100 pips which is not that significant but over the course of that week, it fell as much as much as 750 pips. Between May 3rd (the Monday after the announcement) and June 7th , the EUR/USD fell approximately 10 percent. However, as sovereign debt worries receded and Greece faded from the minds of global investors, the EUR/USD stabilized and began a risk assumption rally that brought the currency pair from 1.20 to 1.42. This means there is first panic and then stability.

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One Response to “How EUR Could React to Irish Bailout”

  1. Stephan Smith said:

    Kathy, it’s possible for the same think to happen again…isn’t it? If Ireland receives a bailout, we could see the Euro decline 5 to 10 percent again, right?

    Oh, did you see John Taylor Jr.’s comment on Bloomberg about how he’s forecasting parity with the EURO and USD?

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