Daily Market News 24 Feb 2011

Yesterday’s Market Movers

It was a relatively quiet day in the currency markets yesterday following the furore the BOE minutes caused. Shortly after the massive peak the GBP failed to maintain this strength against its main counterparts, the EUR and USD, moving back down to trade below the level that these pairings were at prior to the release.

A marginally worse than expected mortgage approvals for the UK had no impact on the markets following the BOE minutes.

With no significant data out in the Euro zone, the only piece of key data for the day that remained was the MBA mortgage applications in the US. Coming out better than expected both MoM and YoY we saw a case of risk appetite as the USD dropped off against the EUR and GBP following this information. Another factor that enters into this weakening Dollar is that as the activity in Africa drives the price of oil upwards due to concerns over supply, investors will be pulling out of the USD and investing into Oil shares.

In the Euro zone today the first piece of data to look out for is the GDP for the German economy for Q4 of 2010. This has the potential to cause some volatility as it shows growth in the German economy, which is the sturdy back bone of the Euro zone at the moment. This is expected to come in flat however so if there is no change then we could see a relatively unresponsive market.

This is followed by EU consumer confidence which is rising slowly at the moment, increasing on previous results in the last few months. If this trend continues we could see some strength for the Euro across the board however could this increased consumer confidence add to the growing concerns about inflation?

The US data for today begins with Durable goods orders which are expected to some in considerably better than previous with a rise of over 5%. This could potentially cause further weakness for the dollar through risk appetite as it is yet another indicator of a recovering US economy.

There is further support for the notion of risk appetite due to US economic recovery we see further data in the form of the initial jobless claims which are expected to decrease, showing an expected improvement in the employment sector, and an expected increase in New home sales. If these figures come out in line or better than predicted then we could see a weaker USD by the end of the day. This is dependant however on activity in Libya as any drastic action taken by Gaddafi could cause a major surge of risk aversion with people investing back into, and strengthening, the safe haven USD until the situation settles.