Italian bond auction goes well as investors decide not to shun Eurozone as Bernanke reaffirms commitment to QE.

Tom Tong28/Feb/2013Currency Updates

GBP

The pound lacked clear direction yesterday and did not range heavily.
The forecast for the second estimate for UK GDP came in spot on and failed to spur interest and steer sterling.

In addition there was a plentiful mix of low tier data released from the UK which most coming in slightly worse than expected. On the other hand the only data worth mentioning on its own was GBP total business investment QoQ, which came in at negative 1.2%, compared to it’s expected positive 0.5%

The only figure out of the UK today was released early this morning, a consumer confidence survey which came in exactly as expected.

EUR

The euro managed to gain on most of its counterparts yesterday.

Markets showed relatively high confidence in the common currency which reflected in the bond purchases in Italy. The sale was successful with plenty of demand and the bid-to-cover ratio increased from 1.3 to 1.7 in yesterday’s auction.

On the other hand it’s worth noting that the yield on 10-year bonds rose from 4.17% to 4.83% as concerns regarding Italy’s political situation are far from over; especially if a new voting process is needed again, after candidates failed to agree on a coalition and express support for Bersani’s government.

In terms of data today there are significant sets to be released from the EU which might send the euro in a clear direction.

At 8.55am the German unemployment change and employment rate is released.

Tightly followed by eurozone CPI YoY and MoM at 10am.
Later in the day we also await Germany’s individual CPI figures.

Any surprise in these data sets are likely to cause movement for the common currency, especially if it’s negative, taking into consideration the recent direction of the euro and the political uncertainty in Italy.

USD

The Greenback lost out against most of its counterparts yesterday.

Analysts argue that the move was mainly dictated by risk sentiments as good economic data spurred investors with confidence to move from the safe haven dollar into higher yielding and riskier currencies.

On the other hand the durable goods orders came in slightly worse than expected -4.8% yesterday, at -5.2%. When breaking down the data investors were calmed by the fact that when looking at the core account of durable goods (exuding the struggling car sector), it showed a significant rise of 1.9%.

Furthermore the US housing market produced some bullish data. Pending home sales growth showed a figure at 4.5%, about 2.5 times higher than expected.

Bernanke had a slightly more positive tone when discussion the outlook, pointing out a strong housing market and rising interest rates from banks.

Today there is the second estimate of the US GDP at 1.30pm; in addition at the same time US initial jobless claims are due.

A second consecutive day with positive data could send the dollar to finish the week on a good note.

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Written by Tom Tong

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