JP Morgan has dubbed Wednesday 12 September "the euro zone's Super Wednesday."
European Commission President Jose Manuel Barroso is expected to present a blueprint for a euro zone banking union in his annual "state of the union" address to the 754 representatives of the European Parliament in the French city of Strasbourg. The Barroso speech is scheduled to begin at 9:00 a.m. CET (3:00 a.m. New York time).
A national election in the Netherlands on Wednesday could provide a litmus test of Europeans' appetite for the austerity measures and financial bailouts so prevalent in the euro zone of late. Dutch polls open at 0530 GMT and close at 1900 GMT (3:00 p.m. New York time).
The European Stability Mechanism (ESM), the eurozone's permanent financial rescue fund, requires approval by countries representing 90 percent of its capital base, and Germany's share is more than 25 percent. On a Friday evening in late June, about 5 of every 6 lawmakers in Germany's parliament approved the ESM. On Wednesday at 10:00 a.m. CET (4:00 a.m. New York time), Germany’s Federal Constitutional Court in Karlsruhe is due to deliver its verdict on the German parliament's decision. As Reuters reported here, legal experts broadly expect the BVerfG to approve the ESM. The London Telegraph's Ambrose Evans-Pritchard isn't so convinced:
I do not know how the Court will rule, but nor do any of the analysts and pundits who say the judges must ratify the ESM because it would be unthinkable to do otherwise. And nor does Chancellor Merkel.
Even if the BVerfG ratifies the ESM, its ruling might come with conditions, such as a cap on the amount of Germany's financial exposure, or a change in the German constitution. Anything less than an unconditional approval of the ESM by Germany's high court could weigh on Europe's single currency.
FX traders should brace themselves for a potentially wild ride on hump day.