GBP/EUR breaks 1.2200
Having fallen below 1.2200 for the first time in 19 months GBP/EUR continued to ease overnight, trading initially around 1.2225 before improving to 1.2250 ahead of the London open. The move reflected general sterling strength with cable rising from $1.59 to $1.6050. Euro-dollar traded in a narrow range around $1.3120 overnight.
Spain is due to auction 2- and 10-year bonds this morning. Given that the last auction was uncovered, markets will see this as a test of investor sentiment. 10-year yields have fallen from 6.09% on Tuesday to 5.8% this morning as initial panic over Spanish debt levels eased.
The market is looking for the advance estimate of eurozone consumer confidence to improve from -19.1 to -19.0. We are more concerned and look for confidence to deteriorate to -20.0, which would reverse the improvement in March. We suspect that the ongoing sovereign debt crisis will have hurt confidence as it has put austerity measures back on the agenda in Spain and Italy and tax increases as well as higher unemployment should depress confidence.
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