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Major Currencies Begin to Recover Following a Steep Selloff in Recent Trading
Thu, Jan 21 2010, 15:15 GMT
Equity Indexes traded higher in Europe, as stock futures in the US point to a positive open following better than expected results from Goldman Sachs. In addition, positive comments from the ECB stating inflation remains subdued allowing the central bank to focus on growth allowing interest rates to remain subdued. Greece’s Finance Minister George Papaconstantinou rejected notions that the country is expecting assistance from the EU. He affirmed that govt. will be able to resolve their debt situation as outlined in their annual outlook. Other positive notes in Asia, specifically China lifted market expectations and improved overall risk appetite.
In Europe, economic announcements were fairly light after an active week in both the GBP and EUR. Manufacturing and Services contracted to 53.6 from 54.2 in December. The worst than expected reading failed to meet economist’s estimates of 54.4. ECB Member Juergen Stark stated that growth in the Eurozone region might be “somewhat more muted” than performance in the latter part of 2010. European
unemployment remains exceptionally high, and is an underlying concern for policymakers looking to structure a timetable to wind down stimulus.
Chinese GDP surged overnight reaching its highest level since 2007 adding further evidence the global economy is moving towards a recovery. GDP rose 10.7% on an annual basis, beating forecasts of 10.5% by Bloomberg News Survey estimates. Pressure to tighten monetary policy intensified as the growth data shows China averted one of the deepest financial crisis’s in history.
AUD benefited from the surge in Chinese growth as traders placed bets that the currency will benefit from increased demand by its largest trading partner. Considering Australia’s linkage to China, a direct correlation is apparent between Chinese economic growth and fundamental supporting factors for neighboring currencies like the AUD. The Kiwi benefited from better than expected retail sales, which came in higher by 0.8%, New Zealand fixed income markets also reacted positively with fixed payments on floating rates rising 0.02% to 4.48% from 4.46%.
Jobless Claims rose to 482,000 vs. estimates of 440,000 with a moderate effect on price action. Investors are awaiting comments from President Obama regarding possible reform of bank’s proprietary trading practices. The rally in financials following Goldman Sachs positive results has been stalled; until market participants get more clarity new announcements might be made from US policymakers.