Angela Merkel and Wolfgang Schaeuble sure know how to ruin a party. A euro party, that is.
Woo hoo! The euro ran up almost seven big figures over little more than a week on hopes for a euro zone debt deal. But then on Monday, both the German Chancellor and the Finance Minister weighed in, and .... pffft.
The chancellor warned that "the dreams that are emerging again, that on Monday [October 23]everything will be resolved and everything will be over, will again not be fulfilled," said her spokesman. And Schaeuble said that a permanent solution to the crisis was unlikely to appear as soon as investors had been hoping.
Meanwhile, as Elsa Lignos of the Royal Bank of Canada points out, Greece is set to vote on austerity measures this Thursday. "Though Parliament is expected to vote yes to avoid default, public reaction is worsening while some strikers have made it their aim to topple the current government," she wrote in a note to clients. "There is a non-negligible chance this vote fails, which would throw up further hurdles to the grand plan."
That said, Lignos points out that there does seem to be agreement on a few key issues, like "increasing the firepower of the EFSF bailout fund; recapitalising the banks; and devising a credible programme for reducing the stock of Greek debt that would include increasing the haircut of up to 50%" for the banks.
One of these days, the euro situation has to clear up. Until then, well, hold the champagne.
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