Yesterday, the German Chancellor, Angela Merkel and the French President, Nicolas Sarkozy in a meeting with the fresh Italian Prime Minister, Mario Monti split over the issuance of European joint bonds, where Merkel said that joint bonds would remove any incentives for European nations to improve their budgets and fiscal consolidation.
Merkel reassured that Germany is still against the intervention of the European Central Bank, which is something France seeks in order to control the market instability and rising yields, where France demanded the ECB to play a larger role in fighting the debt crisis.
Pessimism spread further in the market after leaders were not able to agree on anything, which driven the euro to hit 7-week low today against the U.S. dollar, where markets are looking forward to ECB role in tackling the debt crisis, while Merkel disappointed investors who hoped that Germany will allow the Bank to intervene after the crisis spread into the German bond auction.
The euro continued the downside movement against the U.S. dollar to currently trade at $1.3307 around the 7-week low recorded at $1.3298. The pair opened the session today at $1.3344 and reached a high of $1.3350.