Further gains for Euro despite Slovak vote

Tom Tong12/Oct/2011Currency Updates

GBP

Sterling fell against the Dollar and Euro during Tuesday trading due to a mixture of profit taking from Monday’s risk rally combined with patchy fundamental economic data. The output data released on Tuesday morning showed a surprise rise in industrial output to 0.2 percent while manufacturing output disappointed with a 0.3 percent decline. .The markets are focusing in on fundamental U.K data at present which is not showing a positive outlook for economic growth. .Today’s focus will be on the unemployment reading released at 09:30am which is anticipated to show a slight increase in the claimant count rate.

EUR

The Euro Zones bailout fund was dealt a blow on Tuesday evening after the Slovakian Parliament voted no to an increase its guarantees for the European Financial Stability Facility. Slovakia had been asked to increase its guarantees for the EFSF from 4.4bn euros to 7.7bn. The euro had fallen in early trade on Tuesday due to caution ahead of the Slovak vote and word on whether Greece will receive its next round of a loan to avert a debt default. As the day progressed the European Union, IMF and Central bank stated an eight billion euro loan tranche to Greece should now be paid in early November which did firm up the euro. There are however lingering concerns that Athens have only made patchy progress in meeting the terms of a bailout agreed last year which may limit the euro’s upside. The leading powers of the euro zone Germany and France have promised to propose a comprehensive strategy to fight the debt crisis at the delayed EU summit on October 23rd. Today’s key economic data released from the euro-zone comes in the form of the Industrial Production figures for August which are forecast to show a decline.

USD

With a distinct lack of economic data on which to focus the dollar’s direction was driven by risk appetite, which diminished throughout the course of the day ahead of a Slovakian vote on changes to the euro zones rescue fund. Aside from Economic data Senators in Washington voted through a bill which will allow the U.S to punish China for the undervaluation of its currency. The bill passed by 63 – 35 has been designed to encourage China to let its currency rise by giving the U.S the power to charge tariffs on goods from countries that have subsidised their exports via the currency market. There have been numerous complaints that the Chinese Yuan is undervalued by up to 40% which is giving its exporters an unfair advantage in international markets. Today the markets focus will be on the trade balance and jobless claim figures for October combined with the FOMC meeting at 7pm.

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Written by Tom Tong

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