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.

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