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The euro is sitting on another gain this morning, despite the sensational headlines that have continued to spill out of negotiating rooms in Europe over the last week. Fears that debt talks might collapse and force Greece back onto the drachma have largely failed to shake market sentiment, while a much stronger than expected German growth number is driving the common currency upward as we go to pixels.

Europe’s largest economy expanded by 0.7% in the fourth quarter, bolstering hopes that activity across the broader bloc could be on the path toward recovery. Italian, Portuguese and Spanish yields are down sharply, while equity markets are nearing a seven-year high.

The euro is up almost three percent since hitting it’s nadir three weeks ago, but turbulence continues under the surface. Discussions between new Finance Minister Varoufakis and the European Central Bank, European Commission and International Monetary Fund remain deadlocked, raising the possibility that further volatility could come over the weekend as various players air their views in the media.

Across the pond, the Canadian dollar is sitting on modest gains after a December factory shipment report beat forecasts, illustrating a possible rebound in exports to the United States. Statistics Canada reported that manufacturing sales grew by 3.2%, helping to offset a 9.3% drop in sales of petroleum and coal products. Motor vehicles drove much of the gain, boosting hopes that the economy is beginning to rebalance away from its dependence on raw materials.

The big dollar is on the defensive, dragged down by yesterday’s weaker retail sales and jobless claims numbers. Investors are driving yields down, and edging out of the overwhelmingly long positions that had built up through the early part of the year, giving the yen and euro some reprieve.

Heading into the weekend, it is clear that a number of previously unstoppable market trends are vulnerable to reversals – meaning that hedgers should be prepared to seize long-awaited opportunities as they arise. Have a great weekend!

In our latest podcast we feature an interview  with Dan Blystone and update on Greece

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