Leaders gather at Davos as risk returns to the market
24/Jan/2012 • Currency Updates•
As the World Economic Forum Annual Meeting opens today, the leaders’ main focus is on the Eurozone and the wider political unrest in the region. Markets in China, Hong Kong, South Korea and Singapore are shut for the Lunar New Year holiday and the UK Q4 GDP print and MPC minutes are due on Wednesday.
The FTSE hit its highest level yesterday in just under 6 months yesterday as risk appetite increased. Sterling hit a two-week high against the dollar on Monday as tentative hopes for a Greek debt deal put broad pressure on the U.S. currency, although speculation about further quantitative easing by the central bank limited sterling gains. The pound lost ground against the euro, with the cross set to take direction from talks between Greece and private creditors on the terms of restructuring the country’s debt.
The IMF is set to cut its growth forecast today for Europe and the World according to leaked reports in the Telegraph. The Eurozone’s growth is set to shrink yet England will grow by an anticipated 0.6%. The IMF also warned that the eurozone needed more funds to build a firewall to prevent the contagion from spreading to its core economies. This was agreed to by Angela Merkel despite her longstanding resistance to increasing the funds. The European commission’s consumer confidence index rose from December to January. The Bank of Spain estimated a decrease in GDP by 0.3%. Despite the grim news a French bond Auction went smoothly and they increased there ECB funding , meanwhile Eurozone finance ministers rejected an offer made by private bondholders to help restructure Greece’s debt which raises the threat of default.
The S & P 500 is up nearly 5% so far this year as an improving US economy has boosted investor optimism. Demand for the dollar was limited before the Federal Reserve begins a two-day policy meeting, after which it will provide forecasts for its benchmark interest rate for the first time. The Dollar changed little against the Euro during the Asian Market, and the yen was little changed versus the greenback after the Bank of Japan cut its economic growth forecast for next year.