Focus continues on Euro…
Focus will be on today’s (and through the weekend) IMF/World Bank/G-20 Finance ministers and Central Bankers meeting in Washington with the core discussions likely to centre on the ongoing eurozone crisis. Yesterdays Spanish bond auctions did little to change the mood of the market and the overnight price action suggests that the same tone will prevail going into the weekend particularly as the expectations from the meetings to decide on a $1trln firewall to help deal with the Eurozone crisis has now been lowered to an amount just under $800bn.
This morning strong retail sales figures have given support to GBP but really these this type of data is a side given the back drop of the Eurozone. GBP/EUR has broken to levels not seen since mid 2010. Further support could come in the form of MPC member Posen’s statement overnight that the UK economy appears to be in a much stronger position than data would suggest whilst against the USD Sterling has maintained its position above the 1.60 level and performance-wise so far has been the out performer against the dollar indicating that in the context of safe haven status GBP has come out on top as sentiment towards the euro remains depressed while uncertainty remains over the Fed’s path and the recent poor data. As a consequence we expect GBP to hold onto its bullish momentum with a substantial break above the 1.6062 level opening potential for a test of the 1.61 handle while GBP’s hold at 1.2200 against the euro bodes well for a test of the 1.23+ level.
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