If the news is so bad, why is the euro up?

The news on the euro has been nothing but bad. Portugese 3-year bond yields are more than 20%, Greece is on the verge of default and Fitch joins S&P in cutting ratings across Europe. Yet over the past two weeks, the euro rallied from $1.26 to $1.32, including a move higher today, when Fitch announced the downgrades. Maybe the market action reflects something other than headlines?

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