Yet another bond auction and yet another positive push for the euro. The successful sale of $750 million at a yield of 4.029% tops last month’s yield of 5.281%. A series of fruitful bond auctions and ECB bond purchasing has succeeded in buying European ministers precious time, precious time which must be used wisely in developing a wider overarching economic strategy. The markets will not wait and the clock of justification remains ticking for this week’s rollercoaster euro Index.
Whilst the Forex gaze remains ever watchful of euro zone fragility, focus has shifted today towards the US markets and incoming US earnings. US earnings offer a valuable window into the health of the US business sector and are eagerly anticipated. The data will prove a precious technical source for contextualizing US employment data. These results have also brought the inevitable gust of bullish sentiment surrounding equity trading, such sentiment is likely to have wider implications on Forex trading. High level US banks releasing data include Goldman Sachs and Wells Fargo, on top of this housing starts and permits are also due to be released at 1.30pm (London time) markets are bracing for a truckload of data.
As the US weakened, and the Forex markets tensed Sterling gained against the US dollar. This gain occurred despite; the National Office for statistics data indicating that UK unemployment had risen to 49,000. Granted the data, did match RBS expectations but the markets seem to have turned their back on this knowledge as they feast on the broader possibility of Bank of England interest rate alterations. In anticipation of gorging on Bank of England change, Sterling is likely to settle at a higher level.
Asia continues its stronghold on market change, with the Japanese Yen continuing to increase steadily against the US dollar. A tone of cautious US consumers was aptly conveyed by the equally cautious and dropping ABC/Washington Post consumer confidence index which fell to -43 from -40. Whilst increased Chinese disconnection from Chinese holdings in US government debt did little to improve market attitude. This tentative US caution can be contrasted with shattered Australian confidence as the Australian Westpac consumer confidence index indicated a January drop of 5.7%. Nevertheless Australia continued to regain parity against the dollar.
Market insight: 19.01.11
