EUR rallying is this a rally or just a pull back. Profit takers pushing it up so they can sell it still no legit good news out of EUR #fx
No real surprises from the European Central Bank and the Bank of England after their monetary policy sessions yesterday with markets getting a little more optimistic encouragement after successful bond auctions in Italy and Spain. Italy succeeded in selling €12bn of bills at 2.735%, half the rate of last month’s auction with Spain selling nearly €10bn, considerably more than expected, of three and four year bonds at the lowest levels for some months. There is a €4.75bn bond issue from Italy this morning for 2 and 6 years which again will be monitored closely. There will be a sense of cautious optimism within the Eurozone markets that the past actions of the ECB, including yesterday’s holding of Eurozone interest rates at 1%, are clearly starting to reap some benefits, with “Super Mario” Draghi in the press conference yesterday suggesting that the ECB’S provision of €489 longer term cheap funds to the European banks is “providing a substantial contribution to improving the funding situation of the banks thereby supporting financing conditions and confidence”. Enough clues I think from Draghi to support the view that there will be an easing of European monetary policy over the course of the year but also cautious words from the ECB’s President that debt issues and the restructuring of the economies as yet have not been fully resolved which will maintain the pressure on the future economic outlook and that downside risks remain in place.
US markets will be looking at this afternoon’s University of Michigan confidence report where expectations are that the level be at its highest in seven months.
Oil prices continue to see-saw on the back of Iranian tensions and the possible oil embargo sanctions, now I see possibly being delayed by the EU for six months, to be applied in purchasing oil from Iran. The crux of the problem is the replacement to Iran as a supplier of oil to Eurozone countries and the impact this I going to have on future pricing. So far the threat of closure of the Straits of Hormuz, the gateway for oil supplies, has not been carried out but it does remain a potential hot potato in the politically sensitive Middle East region. Some bizarre oil price predictions I am seeing being banded about with a range of $50 per barrel to $200 per barrel for the year. Now that’s what I call a range!!
The NIESR GDP report published yesterday afternoon showed UK growth in the fourth quarter of 0.1% and growth in 20111 at 1%, less than half of that seen in 2010. The ONS first estimates of fourth quarter GDP growth are due to be published on January 25th. UK data yesterday also showed a weaker performance in the industrial and manufacturing sectors with the day “nicely” rounded off with a weak assessment of the UK’s economic performance and outlook by the OECD.
The end of the week again with the Eurozone markets still taking centre stage but markets being distracted by Swiss Franc activity, Iran, corporate earnings and a slight decline in the dollar’s recent gains.
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