Daily Market Report 21/09/12

The euro has enjoyed a strong period of gains against many major currencies in the last few months. Since Mario Draghi’s comments, pledging to ensure the survival of the single currency, investors have viewed the euro’s prospects with rose-tinted glasses. Without the worry of a collapse on their hands, risk appetite for the shared currency did increase, however on review of pure economic performance, the honeymoon period has faded.

Now the promise of protection does little to improve the languid growth and fiscal disillusion abundant within the area. Investors who enjoyed the risk appetite in Europe have suddenly lost their hunger. A flight to safe havens, in particular the dollar and yen, has caused the euro to diminish today as other major currencies around it strengthen.

Despite the demand for Spain’s bonds increasing as bond yields almost dropped to yearly lows, the seemingly inescapable bailout casts a shadow over the entire 17-nation area.

Problems in Europe served to strengthen the dollar against most major countries, before a surprise drop early this morning thanks to rallying stocks. Meanwhile the bolt from the euro nullified the Bank of Japan’s stimulus efforts of two nights ago as the yen’s security as a net-creditor strengthens the currency.

In a tame day for headline announcements, there is unlikely to be any big market movers. The UK public sector net borrowing, which is expected to show reversion to deficit, is the most influential data released today at 09.30am.

See previous Daily Market Reports