The euro has managed to push firmly into positive territory this afternoon, helped by falling yields on benchmark Italian bonds, a new Greek PM and some slightly better US jobless figures.
Active moves by the ECB sent ten-year bond yields below the vital 7% line, as Mario Draghi deployed the firepower at his disposal to help stem the crisis. However, he is likely to have only bought time with this move, a point underlined by the morning auction of one-year bonds by Rome. The yield for these hit an unsustainable level, reaching 6.087% from 3.57% at the last auction. While the Italian state appears to be moving towards a technocratic government, the delay is not helping to restore confidence among investors. Still, at least the Greeks have finally got around to picking a new prime minister for their embattled country, although why anyone would actually want the job is quite beyond me.
Lucas Papademos, a former vice-president of the ECB, has grasped the poisoned chalice, heading up a government of national unity. ECB officials and markets will be hoping that this government can carry through the needed reforms to get Greece out of its current malaise. Finally, a drop in US jobless claims to 390,000, below the important 400,000 mark, aided sentiment, although last week’s figure, which was 397,000, was revised up to 400,000. All eyes now turn back to Italy, with traders hoping that the ECB will remain active for some time to come.