Markets on edge

This week has fared well for the European bond auctions and has eased market concern over the European sovereign debt crisis. However, market seems to be on the edge today as Greece heads into the third day of talks with private creditors on the debt-swap plan. With little on tap in terms of economic releases today, markets focus will be on US existing home sales and news flows from the Eurozone. On the domestic front, data just released has revealed that retail sales climbed for December.

Pound Sterling – UK Markets

Sterling is trading in a narrow range against both the Euro and the US Dollar this morning. Data just released indicates that retail sales advanced 0.6% M-o-M for December compared to a 0.7% decline posted for the previous month. This is in contrast to yesterday’s consumer confidence data, which had indicated a decline in consumer confidence for the same period. With a light economic calendar today, investors stay focused on next week’s UK GDP numbers for the fourth quarter. Meanwhile, an IMF forecast indicates that Britain will emerge as the best performing major economy in Europe this year. We expect Sterling to trade range bound against the Euro today amid an apparently uneventful day in Europe.

US Dollar – US Markets

The US Dollar has advanced against the Euro and is trading flat against Sterling this morning. Yesterday’s closely watched economic calendar in the US revealed a mixed set of numbers. Disappointing housing starts and a weaker than expected Phily Fed index, coupled with easing inflationary pressure, have raised market expectation that the Fed may resort to further easing measures to spur growth. However, jobless claims fell to the lowest level since April 2008. Investors expect positive reading on the existing home sales data slated for release today. According to reports, the IMF is likely to affirm that the US economy will continue as the major growth driver for the global economy.

Euro – European Markets

The Euro has lost marginally against the US Dollar this morning following reports of the IMF’s downbeat outlook for major European economies. Additionally, Moody’s has warned that it may place several European banks under review for possible downgrades during the first quarter of 2012. Yesterday, the Euro had gained against the US Dollar tracking a successful round of French and Spanish bond auctions. Market worries over Greece eased after Greek Finance Minister, Evangelos Venizelos, assured of progress on debt-swap talks with private bondholders. Lifting the mood further, the ECB President, Mario Draghi, opined that he is confident that the overall situation for the Euro will look much better in 2012. Meanwhile, data released this morning indicates that 2011 annual producer price inflation in Germany rose to the highest level since 1982. With no major economic release slated for today, we expect the Euro to take direction from news bytes emanating from Greece.

Other Currencies – Highlights

The Canadian Dollar has lost ground against the US Dollar this morning, ahead of the key consumer price inflation data in Canada due today. Traders expect the annual consumer price inflation to ease to 2.8% for December from a 2.9% rate recorded for the previous month. Citing growth concerns and economic risks posed by the European sovereign debt crisis, the Bank of Canada, in its monetary policy meeting earlier this week, maintained its benchmark interest rate unchanged at 1%.