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Will the Euro Contagion Be Contained?

Monday, 11 Apr 2011 | 3:01 PM ET

Now that Portugal has capitulated and asked for financial assistance, traders are fixated on the potential for its problems to spread.

Brian Kelly of Kanundrum Capital is optimistic that the mess can be contained. "Essentially, Germany and France are backstopping the whole euro zone," he told CNBC's Melissa Lee. "We've now reached that point where it's in Germany and France's best interests to keep their bond markets stable, to keep their interest rates relatively low, to keep inflation in check, and to have a stable if not a rising currency. That's exactly what you're seeing in the euro here." Kelly argued that the euro still has room to run, and any pullback would be a chance to sell the dollar.

Money File: What a Week for Euro
The plot thickens even more this weekend as European finance ministers meet to work out the terms of a rescue plan for Portugal. Brian Kelly, Kanundrum Capital, tells viewers why the Euro contagion was contained, with CNBC's Melissa Lee and the Money In Motion traders.

Todd Gordon, co-head of research and trading at Aspen Trading Group, disagareed. He pointed out that looking at Elliott Wave patterns in 10-year Spanish bonds, he sees a big chance yields will move higher. And Andrew Busch, global currency and public policy strategist for BMO Capital, agreed with Gordon longer term, pointing out that at current levels the euro seems overbought.

You can watch the debate in this clip, and get ready for all the news coming from Portugal in the next few days.

*Accounts managed by Kanundrum Capital are long euro-dollar.

CURRENCY FUTURES90falsefalsefalse300truetruetruefalsetruefalsebottomfalselarge1dayoverviewfalsefalsefalse0truehttp://api-cdn.cnbc.com/api/chart/chart.aspGE4true3DXC1:$ INDEX FUT::::future#UROC1:EUR FUT::::future#JYC1:JPY FUT::::future#BPC1:GBP FUT::::future#CDC1:CAD FUT::::future#left/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__ICONS/icon_story_360_TV.gif1505000lefttruehttp://msnbcmedia.msn.comCNBC 360 TVfalse1PfalsefalsefalsefalseCNBC TVTune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.

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