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Euro recovers lost ground against majors



US Dollar: The U.S. dollar was slightly lower against its major rivals in overnight trading, taking its cues from stronger equities markets, which prompted investors to seek higher-yielding currencies. Many of the dollar-based majors would set out for a dramatic reversal Tuesday through the US session that would result in wide ranges and comparatively small daily changes. Through the first half of the trading day, risk aversion was in full swing. Starting with dramatic declines in Asian equities, the capital markets would start a tumble that would maintain direction through the European hours. Trying to pinpoint a specific cause for this shift in sentiment, there was an array of events and reports that could be assigned responsibility for the unfavourable turn in senti¬ment. Yet, more likely than not, the unwinding of risky positioning and investment into qualified safe haven as¬sets was likely a market-generated run that was provided motive after the fact. Coverage of the growing ten¬sions between North Korea and its many critics has added a sense of geopolitical anxiety to an otherwise finan¬cial concern. Though the posturing from the isolated nation is concerning, it is not altogether unusual though everything looks more threatening when global sentiment is already gloomy.
DATA : New home sales    

Pound: The British pound fell against the dollar on Tuesday, tracking the euro lower as money market jitters stemming from concerns about the European banking sector prompted investors to sell risky assets. The week¬end takeover by Spain's central bank of savings bank CajaSur triggered a renewed wave of broad risk aversion, which also hit sterling. Analysts in Spain say the CajaSur rescue could be the first of several before mid-year but that they do not threaten the country's financial system stability. However, the news drove up the interbank funding cost and fanned dollar demand in a market already stressed by concerns over peripheral euro debt. Negative sentiment spilled over to sterling, already under pressure from concerns that fiscal tightening meas¬ures would weigh on Britain's growth. Data showed Britain's economy grew 0.3 percent in the first quarter, slightly faster than initially estimated, thanks to a strong rebound in industrial production and business services.
DATA : No major data to be released today

The euro recovered lost ground against the dollar but this was more the work of underlying sentiment currents rather than any intrinsic strength from this particular currency. When push comes to shove, the euro is considered one of the most fundamentally exposed currencies in the market, making it immediately susceptible to fear though not necessarily reactive to a rise in risk appetite. From an economic stand point, today’s events will hopefully be promising. The Euro Zone’s new industrial orders report for March was the only indicator of note and the 5.2 percent increase was the biggest since June of 2007. However, euro traders are not concerned about these lagging and low-level activity reports. More interesting was the news that the Finance Ministry in Germany was proposing an expansion of its naked short sale ban on government debt and credit default swaps to cover equities as well. Not alarming in itself, the fact that Germany is the only one pursuing these measures smacks of fear amongst market participants. Also notable was a debt auction in Spain that drew markedly higher yields on 3 and 6 month bills.
DATA : French consumer spending

General: Gold prices eked out gains on Tuesday as tensions on the Korean peninsula and worries about Europe sparked safe-haven bullion buying.

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GBP/USD 1.4372
GBP/EUR 1.1694
EUR/USD 1.2286
GBP/JPY 129.56
GBP/AUD 1.7421
GBP/NZD 2.1514
GBP/ZAR 11.2634
GBP/CHF 1.6669
GBP/CAD 1.5410
GBP/SGD 2.02980
GBP/THB 46.50
GBP/HKD 11.2135 red-down; blue-up (snap shot)


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