*1. Spanish and Italian Auctions Successful, Euro Extends Rally*
Today the European markets were focused on debt auctions from Spain
and Italy. Spain managed to sell €3 billion of bonds, paying a yield
that was close to 4.590%. That was higher than in previous auctions
but a level that was below that in the secondary market and left
investor feeling more optimistic. Italy's auction was also
successful.
The news, in addition to what we reported yesterday in regards to
developments around extending the European Financial Stability
Facility gave the Euro a lift in today's session. Even if Portugal
may have to be forced to seek a bailout, if there is enough in the
EFSF to cover a possible rescue of Spain then markets can be more
reassured.
*2. Swiss Franc Pressured by Growth Outlook*
Overnight we had the Swiss National Bank Vice-Chairman Thomas Jordan
say that the country's economic growth will be lower than
anticipated in 2011, on the back of a stronger domestic currency. The
Franc has come off record highs against the Euro and US Dollar. Jordan
said the economy will grow 1.5% in 2011. Tomorrow, government
officials and business leaders meet to discuss the sky-high franc.
We'll see if we hear talk of intervention come out of the meeting.
*3. GBP Stronger on Manufacturing Results*
With the US Dollar weaker vs the Euro, as optimism there grows,
Sterling rallied against the greenback as well. While the Bank of
England Rate decision did not hold much in terms of surprises, we are
seeing a shift in expectations around the Bank of England and when
they may hike rates next. Some think it could be as early as this
June, as persistently high inflation has taken the BOE out of the
monetary stimulus game.
Manufacturing data overnight showed output rising 0.6% in November, a
bit stronger than expectations, which helped the GBP/USD to hold its
gains.
Source: Fxstreet.com
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