After a tantalizing period of inactivity, Spain finally gave investors an insight into its future movements as the 2013 budget was announced. By implementing a fifth round of austerity measures, largely through reducing spending, Rajoy’s government gave the indication that the nation is aligning itself with the necessary fiscal rigor to achieve an ECB bailout.
Amid the uncertainty of recent weeks, the markets have increasingly distanced themselves from the single currency. This initiative served as the welcomed confidence boost that investors have been crying out for, rallying from a two week low against its major peers in the wake of the announcement, it finished the day up on the dollar and yen, whilst largely recouping its earlier losses against the sterling.
After a busy day of data, the dollar had the largest slide as better than expected jobless claims left investors feeling more bullish as the safety vs. risk equilibrium attempted to find parity.
It was a day when nominally disappointing figures were vying to be the best of a bad bunch, further illustrating the faltering picture of the global economy and the arduous times that lie ahead.
The sterling benefitted from the improving US data, and despite a heavily worsened current account, the UK received a boost as GDP figures contracted by less than analysts had predicted. The sterling has been one of the standout performers this year, ascending 1.9% against its peers.
The results of today’s banking stress test will reveal the extent of the hole in Spain’s financial system caused by the property crash, meanwhile the French budget to be released may reinforce yesterday’s euro performance.
Today’s Key Announcements:
- 07.00am – EUR – German Retail Sales m/m: returned 0.3% slightly worse than predicted
- 07.45am - EUR - French Consumer Spending – above expectations at 0.4%
- Tentative – EUR - Spanish Banks stress tests
- Tentative – EUR – French Budget
- 13.30pm - USD- Personal Consumption - marginal increase expected
- 14.45 - USD - Chicago PMI - marginal decrease expected
- 14.55pm - USD - Consumer Sentiment
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