How to Trade the Sarkozy-Merkel Plan
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Investors were hoping for more than they got from the meeting between Frances's Nicolas Sarkozy and Germany's Angela Merkel. Here's what to do now.
Angela Merkel and Nicolas Sarkozy have a history of finding solutions to euro zone problems - but there were no big breakthroughs in their post-meeting announcement Tuesday. Even as peripheral countries grapple with sharply higher interest rates and enormous investor skepticism, Merkel and Sarkozy proposed more frequent meetings of euro leaders, a new head of the euro zone, and a financial transaction tax.
"I was really hopeful at the beginning of the press conference," especially with the talk of a new direction and common governance, says Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional. But then the discussion turned to incremental measures. "What kind of capital wants to go to Europe and support the euro with short selling bans and now taxing financial transactions? I said, interesting medium-term ideas but short-term a big disappointment."
Patterson told CNBC's Melissa Leethat she has been avoiding the euro-dollar trade amid the intense focus on the Merkel-Sarkozy meeting, but now that it's over, she suggests getting ready to short euro against the dollar. Patterson would sell the euro at $1.4520 ahead of Fed Chairman Ben Bernanke's Jackson Hole speech, with a stop loss at $1.47.
You can watch the discussion in the video clip.
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