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Why Markets Are Skittish Today

Thursday, 20 May 2010 | 3:48 PM ET

The markets have come off their lows as the euro has rallied against the dollar, yen, and Australian dollar.

The rumor is of intervention...maybe, but last time the ECB itself intervened was years ago...it is possible that constituent banks like the Bundesbank or the Swiss National Bank may have intervened, but even then it is a fairly rare occurrence.

They intervene not to protect levels, but to limit market volatility. In English: they do it to punish speculators. It makes speculators nervous because you never know when banks might be intervening. Add to the fact that they don't have a formal statement mechanism to say whether they are actually intervening.

Why markets are skittish: a battle royale is shaping up between France and Germany.

France wants very large rescue packages, promises of austerity, fiscal unity, and a clear statement that no one leaves the EU.

For the Germans, it is increasingly expensive to hold that view. They pay a disproportionate share of providing the bailout. Many Germans would clearly prefer to let the Greeks leave.

Tomorrow we have upper and lower house elections in the German parliament. This view may become more clarified, and you many find that the appetite from Germans to fund these rescue packages is declining rapidly.

That's why the markets are skittish.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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