Market Review - 10/01/2012

[acetraderfx]

Market Review - 10/01/2012 22:00 All times in GMT

Euro strengthens on signs that Europe is tackling debt crisis

The single currency strengthened against the greenback on Tuesday as a meeting between German Chancellor Angela Merkel and IMF MD Christine Lagarde added to signs European leaders are moving to end the debt crisis.

Although the single currency dipped from an Asian high of 1.2797 to an intra-day low at 1.2743 in European morning, euro rose to a session high at 1.2819 in New York morning after a rally in European bourses and a meeting between Angela Merkel and Christine Lagarde increased risk appetite. However, euro pared gains and retreated to 1.2764 as investors remained cautious ahead of European Central Bank policy meeting and crucial debt auctions on Thursday and Friday from Spain and Italy.

The British pound ratcheted higher to 1.5485 ahead of European open due partly to the release of better-than-expected retail orders and house prices before retreating to an intra-day low of 1.5447 in European morning. However, cable rose to session high at 1.5500 and dropped briefly to 1.5452 before rebounding to 1.5498 in New York morning.

U.K. RICS house price balance in December came in at -16, its highest since June 2010, vs the forecast of -19 and -17 in November. BRC retail sales in December was released at 2.2% y/y, vs the forecast of 0.1% and -1.6% in November.

The greenback traded narrowly against the Japanese yen and Swiss franc in an intra-day range of 76.78 - 76.90 and 0.9466 - 0.9511 respectively.

FTSE100, CAC40 and DAX closed the day up by 1.50%, 2.66% and 2.42% respectively.

In other news, Fitch's Ed Parker, Managing Director in Fitch's European Sovereign group, said "expect eurozone to muddle through crisis; German AAA rating is safe; do not expect to downgrade France in 2012; euro countries under review could be downgraded by one or two notches; a more "activist" role of ECB would improve situation in eurozone.'

On the data front, U.S. wholesale inventories rose only 0.1% m/m in November vs forecasts of a 0.5% rise and after increasing 1.2% previously. Canada's housing starts in December were higher than expected at 200,200 vs forecasts of 185,000.

Data to be released on Wednesday:

U.K. BRC shop price index, trade balance, Japan leading indicators, Germany GDP growth.