The Dollar staged a brief rally yesterday afternoon after the announcement that the Irish Prime Minister would be making an announcement at 5pm.
I think everyone immediately thought that we were about to see the bail-out materialise, with risk immediately taken off the table and stocks, commodities and risk on currencies moving into the red. The Euro came under real pressure in the Euro Dollar pair, but Mr. Cowen did not throw in the towel (although the market still thinks he will) and again said that Ireland is fully funded until July and can weather the current storm.
In a statement from the Eurogroup after the Irish P.M had finished speaking, EU officials made it clear that they welcome the Irish efforts in making the necessary fiscal adjustments but that they “confirm that we will take determined and coordinated action to safeguard the financial stability of the euro area, if needed, and that we have the means available to do so”. Mildly threatening language from normally very diplomatic blokes, which is why the markets believe the market based solution for Ireland is doomed.
Sterling moved higher in early trading yesterday after CPI data again showed inflation above target, triggering a letter from the Governor of the Bank of England to the Chancellor to explain the situation. The Bank minutes from this months meeting have just been released, there was speculation of another member on the MPC voting for a rate increases which lifted Sterling again, but after the fact, the minutes showed no change in voting from last month with Sentance voting for a rise, Posen for additional stimulus and the rest for no change. Unemployment data out at 9.30 was exactly as forecast, so the next data of note will be tomorrows UK retails sales figures.
Speaking of which, US retail sales figures were double what the market expected firming up the Dollar before yesterday move up. We will also see CPI data later today as well as a large amount of data on the troubled US housing market. In normal conditions this would normal reflect in the price of the Dollar, but with Eurozone problems looming large, this data may well be ignored in the short run.
