By Kathy Lien
The big story in the financial markets today is the mammoth EU/IMF rescue plan. A lot has been written about the plan on many sites including our own. Given that the plan which in many ways is just as significant as the TARP will be the focus of the financial markets for weeks to come, it is important to have a good understanding of the details and their implications for the foreign exchange market. Over the past few weeks, uncertainty in the Eurozone has affected risk appetite in assets across the globe and even with the rescue plan developments in Europe will continue to dominate trading in the coming weeks. The price action in the forex market indicates that even though investors are relieved to see this major announcement from EU/IMF/ECB, they are not completely confident that it will be a game changer. The goal was to spread calm through the financial markets and if you look at the VIX which fell sharply or equities which rose significantly, you could say the goal was achieved, but if you look at the move in currencies, you would be more skeptical.
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