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Global equities rise as dollar is sold off

Pound:
Sterling had a mixed day against the majors Tuesday as risk appetite increased, pushing cable higher. Versus the single currency we did see some weakness as the view that EU leaders may be coming to some sort of decision on how to sort out the eurozone debt crisis pushed GBP/EUR lower. There is also some speculation that another bout of QE may be coming via the BoE, even as early as tomorrow. Another round of QE would normally lead to weakness in that country's currency, as it would flood the market and devalue the currency. Data wise we have had the BRC shop price figures out, showing a number of 2% which was unchanged from the previous month. This latest shop price survey should reinforce the confidence of the BoE's Monetary Policy Committee that inflation should fall back sharply in 2012 in line with its forecast. Weaker inflation usually see's a fall in that country's currency, so this is not positive for sterling.
Data 09.30: Manufacturing Production m/m -0.1% from 0.2%. 15.00: NIESR GDP Estimate

 

Euro:
The euro rose against the majority of its 16 main counterparts amid speculation Europe will expand funds available to the region's most-indebted nations as leaders prepare to meet in Brussels tomorrow. The 17-nation euro snapped a three-day decline versus the yen after the Financial Times reported yesterday that Europe may combine temporary and planned permanent rescue facilities to bolster its bailout resources. There is speculation that the ECB may  cut interest rates tomorrow which may lead to the single currency coming under selling pressure. Ahead of the summit, we are seeing a certain expectation in the overall market that European policy makers will take a step forward to resolve the debt crisis. That has been giving some support to the euro. The euro rose 0.3 percent to $1.3445 this morning against the US dollar. Against sterling we saw some strength as EUR/GBP hit 0.8598, a week high for the single currency. U.S. Treasury Secretary Timothy F. Geithner yesterday backed a German-French push for closer European cooperation, urging policy makers to work with central banks to erect a “stronger firewall” to end the crisis. He welcomed “progress toward a fiscal compact for the euro zone,” echoing language used last week by ECB President Mario Draghi.
Data 11.00: German Industrial Production m/m 0.3% from -2.7%.

 

Dollar:
The dollar saw some selling pressure yesterday as risk appetite came back into global markets on the back of speculation Europe will get its act in order later this week with regards to the ongoing debt crisis. Global equities rallied as the greenback was down against the majors. Overnight, Asian equities started the session with modest gains as risk appetite was given a lift from a FT article which suggested that the EU were in talks to create a much bigger financial bazooka to put forward at this week's EU summit. This as well as continued optimism that the threat of mass sovereign debt downgrades will prompt EU leaders to solve the debt crisis kept equities higher. Despite continued chatter throughout the markets the USD traded a tight range against the majors, with EUR/USD maintaining its position above the 1.34 level and reaching a high of 1.3446. Cable saw a move of over half a cent in sterling's favour to hit $1.5623
No major data due today.

 

General:
•    Commodity currencies rallied yesterday as the gain in risk appetite saw higher yielding currencies bought as trader's felt more comfortable with taking so called riskier positions. The Aussie dollar rallied and took over two cents off the pound. Figures out from Australia also helped the Aussie currency as GDP numbers rose by 1%.

 

GBP/USD

1.5635

GBP/EUR

1.1625

 

EUR/USD

1.3430

GBP/JPY

121.31

 

GBP/AUD

1.5186

GBP/NZD

1.9980

 

GBP/ZAR

12.454

GBP/CHF

1.4429

 

GBP/CAD

1.5752

GBP/SGD

2.0021

red = down

blue = up (snap shot)

 

These rates are for indication purposes only

 

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