Euro strength continues amid successful peripheral bond auctions as Cameron nears crucial speech

Tom Tong18/Jan/2013Currency Updates

GBP

The pound weakened to a 9 month low against the euro on the eve of David Cameron’s speech in which he warned of Britain’s exit from the EU. However, the speech, that was due to be held in the Netherlands today, will have to be delayed due to crisis in Algeria. With a number of British nationals taken hostage at a remote Algerian Gas facility, the local government attempted a rescue attempt. Early reports suggest that dozens have been killed in the hostage drama and that David Cameron is preparing for ‘bad news’.

Many regarded this speech as his most important with extracts stating the increasingly disenchanted British public could walk away from the EU unless its problems are tackled. He insists he has ‘a positive vision for the future of the EU’ but ‘there is a growing frustration that the EU is seen as something that Is done to people rather than acting on their behalf’. With uncertainty about Britain’s relationship with the EU the pound has underperformed.

There was positive news from the UK as Car exports hit a record high and major high street brands such as Comet, Argos and Primark noting large increases in profit which is in stark contrast to the high profile causalities this earlier in the week.

Due out at 0930 today is the retail sales report which is forecast to grow to 2.1% up from2%.

EUR

The euro pushed higher against most major currencies yesterday buoyed by well-received government bond and treasury bill auctions by some of the eurozone’s weaker states. Spain sold its maximum targeted €4.5 billion euros ($5.98 billion) worth of bonds, as growing confidence in its ability to finance itself for now without international help continued to chip away at funding costs. Treasury bill auctions by Ireland and France were also well-received.

However, in spite of these gains, economic data was not positive. Construction output fell 0.4% on a monthly basis in November while annual decline accelerated to 4.7%. The wider EU zone saw and even bigger fall of 0.9%. In addition to this Holland also suffered a setback as unemployment rose from 7.0% in November to 7.2 in December which is the highest in 10 years.

USD

US data was mixed yesterday with housing data coming in better than expected as building permits printed rose to its fastest pace in four years. However, the manufacturing sector suffered from bad news with the Philly Fed Index missing expectations. It reported business activity fell to -5.8 from 4.6 the month before. This was well below economist expectations for a rise of 5.8.

The number of Americans filing new claims for unemployment benefits tumbled to a five-year low last week, a hopeful sign for the sluggish labour market.

Important information coming out today is Reuters/Michigan consumer sentiment with the consensus showing a rise from 72.9 to 75 showing more confidence of consumers to spend money

Print

Written by Tom Tong

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