By: Andrew Keene
The euro rallied over the weekend to touch a 14 month high on news that the European Central Bank's balance sheet had contracted. The ECB, which has not purchased sovereign debt for 45 straight weeks, was repaid 137.2 billion euros by banks last week with another 3.5 billion euros influx this week. The funds come from repayments of three-year emergency loans to stabilize bank balance sheets, and amount to roughly 4.8% of the 2.93 trillion euro's on the Frankfurt-based central bank's balance sheet.
Other positive news trickled out of Europe last week, including two positive unemployment numbers. The first was a downward revision of the November number to 11.8%, the second a below-expected but still-high 11.7% for December. PMI (Purchasing Manager's Index) data showed the battered manufacturing sector may have hit bottom and begun to rebound. Finally, inflation fell by 0.2% creating the possibility for the ECB to cut interest rates in an effort to further revive the economy.
134 straddle for $3.00
risk: $300 / 1 lot
B/E: $131 and $137