In this video with John Hardy, Head of FX Strategy Saxo Bank, he analyses the outcome of the January EU Summit and notes that not much at all has changed in terms of how the market looks at the Eurozone’s predicament. Concerns about Europe may have eased slightly for now but the seriousness of the situation remains and some market discipline is almost certainly ahead if a more comprehensive solution is not found by politicians soon. Unless such a solution involving the European Central Bank printing more money or a true Eurobond emerges then previous alarming pressure points will almost certainly be reached again, says John.

He likens the situation to a state of suspended animation and says Europe is for now fortunate to have the European Central Bank in the background so readily providing liquidity. The net effect being that peripheral Eurozone bonds are ironically going lower even though European politicians have still really failed to deliver!

A smooth process for the implementation of the new treaty and agreement on the fiscal policing process probably needs to be well settled before the next EU summit in March, however these are long-term sustainability issues and continuing down the austerity route alone is still an unsustainable situation. In the short term the market just really wants to know if the liquidity game will be continued, says John.

Macro data from Europe is still important especially when recent numbers have pointed to more contraction in Eurozone economies. In terms of the near-term EURUSD outlook though, the focus seems to have shifted somewhat away from Europe. According to John, this currency pair seems to be driven by the ‘old classic’ quantitative easing or not/risk appetite or not dynamic for now. Key US data points coming up will be more decisive for Euro-Dollar than data out of the Eurozone or whatever the latest political news is, he concludes.

See more of John's commentary on TradingFloor.com