Time Running Out for Greece

With the Greek bailout dilemma continuing, their Prime Minister urged the country’s politicians to unite behind the new austerity measures in order to secure aid for Greece or risk an exit from the single currency union. A conference call among the Eurozone finance ministers today is expected to shed more light on this front. At home, mixed signals from the macro front continue to heighten uncertainty ahead of the BoE’s monetary policy meeting slated next month. UK retail sales maintained its positive momentum, while consumer sentiment unexpectedly nudged lower. The mantle appears to be transferred to the PMI releases due in the next few trading sessions to decide the trend for Sterling against the majors.

Pound Sterling – UK Markets

The buoyancy in the retail sector continues, as CBI’s latest survey indicated that UK retail sales continued to grow at a robust pace, elevating the chances of a sustained economic recovery in the UK. Against this backdrop, Sterling advanced against the US Dollar and hovered in a tight range against the Euro in yesterday’s session. Despite the evident change in the UK’s retail sector and labour market, the Gfk consumer sentiment index in the UK continues to decline, falling to a six month low in October. This has raised concerns, despite the economy successfully pulling itself out of a double dip recession. In today’s trading session, the Pound has moved higher against the US Dollar while it is trading flat against the Euro. Given the lack of clarity over the BoE’s stance in the next monetary policy meeting and a light domestic economic calendar today, traders are expected to track key the PMI releases over the next few trading sessions for further direction.

US Dollar – US Markets

Positive response to the Italian bond auctions and marginally better than expected Spanish GDP data spurred risk appetite among investors and led the US Dollar to slip against its major peers in yesterday’s session. The greenback has continued to trade under pressure against its major counterparts in today’s session amid higher risk appetite among investors following a sharp rebound the German monthly retail sales. Meanwhile, dovish comments from the Fed’s policymakers reaffirms that the central bank would continue to pursue its current monetary policy stance for some time to come. The Minneapolis Fed President continued his recently adopted dovish stance by stating that the policymakers have more room to act, as the inflationary threat appears to have receded. On the macro front, the S&P/Case-Shiller house price index continued to climb for August, reflecting the recent buoyancy shown by the US housing sector. With the Chicago PMI being the only important economic indicator on tap in the US, traders are also expected keep a close eye on the news flow emanating from the Eurozone finance ministers meeting later today.

Euro – European Markets

The Euro strengthened against its peers in yesterday’s session following a positive response to the Italian bond auctions and a milder than expected contraction in the Spanish GDP. The uptrend has continued this morning, with the Euro briefly moving above the 1.30 mark against the US Dollar, on renewed hopes that the region’s policymakers are moving closer to finalising a deal for Greece. The Eurozone finance ministers are expected to hold a conference call today to discuss the progress in negotiations on the revised Greek bailout. Additionally, the Greek Prime Minister showed urgency, as he called for the nation’s policymakers to support the new austerity measures, in an attempt to secure the bailout money to prevent an exit from the Euro area. Additionally, data indicating that the monthly German retail sales increased for a second month for September also prompted traders to move towards the Euro. Markets are expected to keep a close watch on today’s inflation figures from the Eurozone in order to gauge the prospect of further easing at the ECB’s next meeting. Additionally, today’s Eurozone unemployment rate for September also holds significance.

Other Currencies – Highlights

The Aussie Dollar has edged against its major peers this morning, on upbeat economic data from Australia. Data revealed that building approvals in Australia recovered sharply for September. Additionally, private sector credit continued to grow at a steady pace, reaffirming the Reserve Bank of Australia’s Deputy Governor, Philip Lowe’s view that lower than average interest rate was providing some support to demand in the economy. Looking forward, tomorrow’s official manufacturing PMI data from China holds market interest and has the potential to decide the direction of the Aussie Dollar against the majors. Markets expect the official PMI to signal an expansion in the Chinese manufacturing activity for October. Traders are also expected to keep a watch on AiG performance of manufacturing index and export and import price index readings in Australia for further direction.