Risk appetite has been boosted during the Asian session, sending equity indices higher and providing EURUSD with a temporary respite from the chronic gloom which has dogged the pair for some time. The trigger for this turnaround in sentiment was the overnight release of China’s Q4 real GDP which beat expectations at 8.9% YoY (8.7% expected, 9.1% prior). One of the biggest beneficiaries of this outperformance was AUDUSD; with strong demand taking the pair back up through 1.0400 levels for the first time in over 2 months. Looking at the Asian bourses, the Nikkei is up 1.1% on the day, the Hang Seng +2.5%, and the Shanghai Composite is the stand-out leader with 4.2% gains.
Less encouraging for investors is the news that ratings agency S&P has downgraded the Eurozone bailout fund, the EFSF, by one notch to AA+. This is an alarming development as one of the key benefits of the EFSF was to provide a triple-A façade for the Eurozone’s emergency funding needs. If the credit-worthiness of the stability fund continues to suffer such demotions, the Eurozone will be unable to derive much benefit from its existence. Clearly, the deteriorating situation in Europe is going to increase the pressure and urgency on European leaders to come up with a solution. Every device and proposal put forward thus far appears to be coming up short, and understandably, this is stirring up fresh suggestions of a near-term Greek default.
Coming up in today’s session, we have a number of key inflation measures being released in Europe. Headlining those readings will be the December CPI figures from the UK (4.2% YoY expected, 4.8% prior) and the Eurozone (2.8% YoY expected, 3.0% prior). In the afternoon session we will get the latest monetary policy decision from the Bank of Canada; markets are expecting the BoC to keep interest rates unchanged at 1.00%, but there is likely to be further acknowledgement of weakening global growth going forward.
By
M.Zohaib Gadit
Forex Trading Consultant
Less encouraging for investors is the news that ratings agency S&P has downgraded the Eurozone bailout fund, the EFSF, by one notch to AA+. This is an alarming development as one of the key benefits of the EFSF was to provide a triple-A façade for the Eurozone’s emergency funding needs. If the credit-worthiness of the stability fund continues to suffer such demotions, the Eurozone will be unable to derive much benefit from its existence. Clearly, the deteriorating situation in Europe is going to increase the pressure and urgency on European leaders to come up with a solution. Every device and proposal put forward thus far appears to be coming up short, and understandably, this is stirring up fresh suggestions of a near-term Greek default.
Coming up in today’s session, we have a number of key inflation measures being released in Europe. Headlining those readings will be the December CPI figures from the UK (4.2% YoY expected, 4.8% prior) and the Eurozone (2.8% YoY expected, 3.0% prior). In the afternoon session we will get the latest monetary policy decision from the Bank of Canada; markets are expecting the BoC to keep interest rates unchanged at 1.00%, but there is likely to be further acknowledgement of weakening global growth going forward.
By
M.Zohaib Gadit
Forex Trading Consultant
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