Germany's On Board With The ECB, Fed Up Next

The Euro held its ground close to a 4-month high on Thursday after Germany's Constitutional Court gave the thumbs up for Berlin to participate in the Euro Zone's permanent rescue fund.
The Euro is now looking to further extend gains on the back of possible stimulus from the US Fed Reserve. The Euro was also aided by the positive results from elections held in the Netherlands.
Speculation abounds today, that the Federal Reserve will announce that it will purchase bonds under another program of quantitative easing. Such a program tends to debase the currency. As a result, the Dollar declined to its lowest level in seven months versus the Yen and towards a four month low against the Euro.
It appears to me that the majority view of economists is that the Fed will conduct another round of quantitative easing, which will weigh on the Dollar.
The central bank is also expected to extend the duration of its zero-interest-rate policy as far as 2015. What is interesting, is that two previous rounds of bond purchases have failed to revive the labour market and this is now viewed as a "grave concern" by Fed Chairman Ben S. Bernanke and as a potential justification for a third round.
Although some anticipation for QE.3 has been priced into the markets, I predict that this is not completely so, and that we could see that the Dollar may extend declines, at least in the near term.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, yesterday hit 79.522, its lowest level in Four months.
The Dollar dropped 0.2% to 77.70 Yen earlier today, slightly up from 77.65 Yen which was its weakest level in seven Months. It also dropped 0.2% to $1.2923 per Euro, close to its weakest level in four months.
Gains in the Euro remained subdued as Greece's Prime Minister, Antonis Samaras, was again faced with refusal from coalition partners over plans to cut spending, as regards wages and pensions, that are key to Greece receiving international aid. The European Central Bank (ECB) and the International Monetary Fund (IMF) have already criticised the plans as not going far enough to receive the next tranche of aid.
In the eyes of many analysts, there is now a strong chance that Greece will leave the Euro bloc.
The Euro strengthened on Wednesday though, following Germany's constitutional court ruling that Germany can ratify the European Stability Mechanism (ESM), a 500 billion Euro ($646 billion) rescue fund. The court though had stressed a condition, that Germany's 190 billion Euro contribution can't be increased without legislative approval.
As a result, Spanish and Italian government bonds advanced yesterday. Spain's 10 year yield declined to 5.63%, while Italy's 10 year rate fell to 5.03%.
Today, Italy will auction up to 6.5 billion Euros of government securities set to mature in 2015, 2017 and 2026.