Risky assets up on Greek hopes despite political delays

Tom Tong08/Feb/2012Currency Updates

GBP

Following a report from the British Retail Consortium (BRC), highlighting that UK retail sales declined 0.3% from a year earlier, Sterling lost ground against the Euro and significantly against the AUD. The UK currency sank to a fresh 27 year low versus the AUD following the above data and in addition to the RBA leaving the interest rates on hold following two consecutive months of cuts.

EUR

An elusive agreement on Greek spending cuts continue to dominate market sentiment with only Angela Merkel’s and Nicolas Sarkozy’s proposal to set up a separate account for Greek debt payments to reassure creditors. A resolution is very much up in the air, with a delay yesterday not causing too many surprises and yet so far talks have been “constructive”. A late unscheduled meeting between the troika (European Commission, European Central Bank, International Monetary Fund) was held to put the final touches to the agreement. However, even if a resolution is found, the strength may be questioned, as any failers may cause Greece to leave the Eurozone. In Asian trading hours, the Euro touched an eight week high versus the JPY as speculation that Greece is making progress in addition to data showing the Japan current account surplus slid to a 15-yr low in 2011.

USD

Ben Bernanke warned yesterday that unemployment will remain in an elevated position for a while, only declining gradually, despite recent positive job data. Yet separately, data showed more positive news as consumer credit expanded much more than expected in December, growing by $19.3bn. All eyes will be monitoring the situation in Europe as USD, as the safe have currency, may offset losses made if Greek talks fail. In addition, China said that its industrial output may decline this year.

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Written by Tom Tong

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