Investor optimism for
as long as US fiscal cliff progress continues

Following last week’s Greek progress, attention quickly
turned to the US fiscal cliff. The positive developments from both sides
increased investor risk appetite as the dollar weakened and the euro
strengthened against many of their counterparts.

Investor optimism for
as long as US fiscal cliff progress continues

Following last week’s Greek progress, attention quickly
turned to the US fiscal cliff. The positive developments from both sides
increased investor risk appetite as the dollar weakened and the euro
strengthened against many of their counterparts.

News that Germany may be open to future Greek debt
write-offs reinforced last week’s sentiment, prompting early euro gains this morning.
German Chancellor Angela Merkel stated that if Greece was able to achieve a
budget surplus from 2014-2015, provisions for write-offs could be made.

This week investors will continue to assess the threat of
the fiscal cliff. Any substantial advances will buoy the current attitudes to
risk, continuing to weaken the safe haven dollar. Contrastingly if investors
become restless about a perceived lack of progress within congress, we could
see the dollar strengthen as market confidence retreats.

Though in recent months fundamental economic data has only
played a supporting role in determining the current rates, manufacturing data
out from the UK, US and Europe today could provoke fluctuations. Sterling could
weaken today as manufacturing data is expected to show contraction for the
seventh month, further indicating the stagnating economy.

 

Today’s Key
Announcements:

• 08.15am – EUR – Spanish Manufacturing PMI: down at 45.3
• 08.45am – EUR – Italian Manufacturing PMI: down at 45.1
• 09.00am – EUR – Final Manufacturing PMI: returned as
  expected at 46.2
• All Day – EUR – Euro group Meetings
• 09.30am – GBP – Manufacturing PMI: expected improved at 48.1
• 15.00pm – USD – ISM Manufacturing PMI: expected to return as
  51.5