Action-packed day ahead

Markets were positively surprised yesterday following reports that the IMF was seeking an expansion of its lending resources to protect the global economy. Moving into today there are a number of events set to keep the market on its toes, including French and Spanish bond auctions, debt negotiations in Greece and the meeting between Merkel, Sarkozy and Monti. Across the Atlantic there is a heavy economic calendar slated for today, including consumer price inflation, housing starts and jobless claims data. At home, data released this morning has indicated that consumer confidence deteriorated for December.

Pound Sterling – UK Markets

Sterling was trading in a tight range against the Euro in the early trading session today but has since dived below the 1.2000 levels. Data released has indicated that the Nationwide’s consumer confidence index slipped, for December, to its second lowest level in the survey’s history. This compounded yesterday’s rise in the unemployment rate for November. There are fears that rising unemployment in the UK could offset the benefit of cooling inflation on consumer spending. Aggravating concerns further, the UK Chancellor, George Osborne, has cautioned that the economy faces "very difficult" times. Yesterday the Pound breached the important 1.5400 mark against the US Dollar on the back of “risk on” trading sentiment among traders. In today’s session the Pound is maintaining its gains against the US Dollar.

US Dollar – US Markets

The US Dollar has continued to lose ground against Sterling and the Euro this morning. Yesterday the greenback was under pressure against the majors following reports that the IMF may increase its resources to tackle the European debt crisis. Yesterday’s upbeat US home builder confidence and a rise in industrial production have raised expectations that the US economy is gaining momentum. In a significant development the House of Representatives rejected the request of the US President, Barack Obama, to raise the Federal debt limit by $1.2 trillion. Hogging the spotlight today is consumer price inflation data, which is expected to indicate a deceleration for December, in line with yesterday’s easing producer price inflation. Other significant releases include; initial jobless claims, housing starts and Philadelphia Fed manufacturing index.

Euro – European Markets

The Euro is trading higher against Sterling and the US Dollar as investors await the outcome of the ongoing talks between Greece and private bondholders on a debt-swap plan. Reports indicate that Greece could soon find a resolution to end the stalemate with its creditors. Yesterday, the Euro gained against the US Dollar following reports that the IMF may expand its resources to combat the debt crisis in the Eurozone. Additionally, successful German and Portuguese bond auctions improved trading sentiment towards the Euro. Markets will be closely eyeing today’s French and Spanish bond auctions, as both the countries are scheduled to sell longer tenure securities. On the economic front, the focus is on the ECB’s monthly report. Investors are also keeping a tap on the Merkel, Sarkozy and Monti meeting today which is likely to focus on the Euro area “fiscal compact”.

Other Currencies – Highlights

The Aussie Dollar is trading marginally higher against the US Dollar. Earlier today the Australian Dollar had lost ground against the US Dollar after data indicated that the number of unemployed people unexpectedly grew by 29,300 for December, compared to an increase of 7,500 recorded for the previous month. Markets were expecting the number of unemployed to fall by 10,000 for December. Meanwhile, a survey by the Melbourne Institute revealed that inflation expectations among Australian consumers, increased for January. Yesterday, the Australian Dollar strengthened against the US Dollar aided by reports of the IMF seeking more firepower to combat the European debt issues amid optimism over progress in the Greek debt talks.