There are numerous studies about how sleep deprivation leads to bad decision making, so you have to wonder why, when EU leaders have had more than two years to think about it, deals are announced at 4:00am in the morning. With this being month, quarter and half-year end, it’s not going to be easy to ascribe moves in markets to particular fundamentals, given that it’s all about flow and positioning - and more so than usual. But that said it’s notable that the euro is weaker so far in the European session at the same time that the yen and Aussie have gained ground.
So does the market have an in-built tendency just to trash everything that comes out of the eurozone? No - it boils down more to the split between those measures that can be put into the category of fire-fighting and those that can be classed as rebuilding. Furthermore, the longer a move towards a meaningful resolution is left, the bigger becomes the gap between where the eurozone is (teetering on the edge) and where is it needs to be (sustainable debt and common bonds with appropriate conditionality) that has to be overcome. A move to a structured form of debt-mutualisation two years ago would have been manageable because, Greece aside, Europe was not seen as insolvent. At this moment in time that’s not the case and just how we bridge the gap between the two states, without restructuring beyond Greece, is the question that leaders dare not speak of, let alone consider tackling.