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Euro Futures Volatility Forecast (05/12/2010)

Euro Futures had a sideways week as correctly forecasted the last one but the rally we saw in the last 2 trading days’ session is a consequence of the Non-Farm payroll figures and not due to “market sentiment”.

The drop in volatility to 0.7% (11% annualised) is likely to be temporary and the curve should get back to 0.9% (14%annualised) which has been the average figure in the last 5 months.

The Euro zone is far from being safe because the sovereign debt problems are likely to keep the scepticism of investors quite high. Ireland, Portugal and Spain are still the most cited countries in the financial press and this can easily keep down the price of Euro futures. Also, the macro-economic news released in the USA can significantly influence this market because a recovery of the dollar could push down the price in the 1.28 area

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