Daily Market Report 18/10/12

In the wake of Moody’s decision to keep Spanish debt as investment grade, and German suggestion of a precautionary credit line for the troubled nation, the euro saw yet another day of gains against many of its counterparts.

Touching a month-high against the dollar, optimism continued that the next major step in the euro zone’s battle against the debt crisis is inching closer. The single currency’s gains were supported by strong housing data in the US, which caused the dollar to concurrently decline against almost all of its peers.

There is an apparent air of confidence in the US at the moment, as the boosted housing markets prove to be the main driving force behind the recent economic improvements. These are signs that Ben Bernanke’s QE3, purchasing asset backed mortgages, has been steadily improving sentiment. The resultant effect, as we have seen, is a weakening of the greenback.

Job data in the UK returned very positive, with both the claimant count and unemployment rate moving in the right directions, whilst minutes from the MPC meeting suggested that an extended stage of quantitative easing could be introduced. Rallying strong against the dollar, the sterling resisted the strength of the euro, trading very range bound throughout the day, following an early slip.

Today starts the big EU summit, markets could well move and react to the breaking rumours that are leaked from within. However Greece and Spain are not on the official agenda, as the banking and fiscal unions expected to be the focal areas of discussion.

Key Announcements Today:
  • All Day – EUR – EU Economic Summit
  • 09.30am – GBP – Retail Sales m/m: expected to climb from contraction to 0.4%
  • Tentative – EUR – Spanish 10y Bond Auction
  • 13.30pm – USD – Unemployment Claims: expected climb to 367k
  • 15.00pm – USD – Philly Fed Manufacturing Index: anticipated expansion to 1.3 from -1.9 

See previous Daily Market Reports