Markets have found support after EuroZone bail out

Tom Tong28/Oct/2011Currency Updates

GBP

With the EU leaders striking a deal at the summit, Sterling strengthened to its strongest point since early September. It extended gains after data showed the US third quarter growth raising optimism about the global economic outlook. As long as EUR/USD holds at its current point, GBP/USD should remain supported. Uncertainty is in the air as Bank of England policymaker Paul Fisher said the UK could suffer another recession whilst GBP looks like a safer currency at the moment versus the Euro, underlining the currency markets volatility.

USD

Yesterday, saw cross currencies rally as market sentiment was buoyed by encouraging GDP data out of the US. These figures saw annualised growth at 2.5% which was seen as supportive news to back the greenback for the final sprint of 2011.

This was boosted by the consumer and business spending as Obama’s new non-farm payroll package has increased confidence across America and increased the outlook for further development and overall economic growth. The announcement of new jobless claims for the week fell to 402,000 and the US economy added 103,000, jobs in September, ahead of many economists’ expectations.

EUR

The Euro rose to its highest level yesterday since early September, following the announcement that European leaders have agreed a plan to bail out Greece and strengthen the Eurozone bailout fund.

European politicians hosted a 4am press conference on Thursday morning to tell the world they had reached the agreement, boosting markets across the world that were desperate for some semblance of a deal after weeks of wrangling.

However, the head of the European bail-out fund has dampened hopes that China will come to Europe’s rescue, but still left the door open for a deal with the world’s second-biggest economy. “There is no special deal” with China, Klaus Regling said after travelling to Beijing for talks with China’s central bank and finance ministry. His visit comes a day after European leaders reached a last-ditch agreement to tackle the crisis on Thursday. Regling’s visit comes amid intense speculation that China could invest some of its substantial foreign exchange reserves in the bail-out fund. Hours after the summit deal was struck, French President Nicolas Sarkozy telephoned China’s President Hu Jintao, later giving a television interview in which he defended the idea of asking China to bail out Europe. “If the Chinese, who have 60% of global reserves, decide to invest in the Euro instead of the Dollar, why refuse?” said the French president.

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Written by Tom Tong

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