It was a tale of two halves yesterday with the dollar rallying and European equities plummeting in the morning after Trichet’s traffic light comments. The second half of the trading day saw the declines in the euro and sterling reduced following the announcement by Reuters of the deal between Greece and the EU/IMF. Today’s trading could see more of the former type environment as credit markets continue to tighten and the austerity vote must still take place in the Greek parliament before a significant rebound in higher yielding assets may be seen.
Today’s Economic Data Releases:
EUR – German Ifo Business Climate – 08:00 GMT
Expectations: 113.6. Previous: 114.2.
A dip in the business outlook is expected but this report may be overshadowed by the EU economic summit that is taking place today in Brussels. The next key milestone in Greece is the new austerity measures the nation must approve in order to receive the new EU/IMF package. Political risks remain for the euro and the currency may come under pressure before the weekend. Look for the EUR/CHF to continue to make new all-time lows below the 1.2000 mark.
GBP – BOE Governor King Speaks – 09:30 GMT
Both sterling and the short sterling futures contracts reflect new assumptions for BOE rates in 2012 as the BOE meeting minutes this week showed downside risks remain for inflation with the former plummeting and the latter shooting higher. A late day rally saved cable from closing below 1.6000 while yesterday’s daily low coincides with the support from the late March low. The next significant support is found at the late January low of 1.5750.
USD – Core Durable Goods Orders m/m – 12:30 GMT
Expectations: 1.0%. Previous: -1.6%.
Today’s data release is expected to show stronger business spending but the current short term trend remains in favor of the greenback amidst a risk adverse environment. EUR/USD support is found at the June low of 1.4070 and a break here could test the May pivot at 1.3970. The 1.4400 level may be is the first resistance where the 20 and 50-day moving averages meet.
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