In recent weeks, Eurozone nations have taken preventative measures to keep their debt crisis from escalating. Just last week, the European Central Bank (ECB) lent 489 billion euros to banks to keep cash flowing into Eurozone nations. Today, Italy auctioned off 9 billion euros of 6-month bonds. Tomorrow, Italy will auction off 8.5 billion euros of longer-dated bonds.
The recent news regarding the Italian Treasury bond buying policy and the massive balance sheet of over 3 trillion US dollars that the ECB now manages have caused massive dollar strength across the major currencies (see chart below). The movement across these 6 currency pairs averaged 100 to 200 pips in a matter of hours!
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