Euro selling takes a breather

But it does look very likely that the pause in its recent decline is more to do with a degree of profit taking in other markets than a reversal of the currency’s fortunes. We did see both Euro and Sterling hit 8-month lows overnight as the Asian markets rushed to buy the perceived safe haven US Dollar but once again, proximity to support levels was enough to bounce both rates as Europe entered the fray. The concern for Euro bulls is that recovery attempts seem very limited in scope and small in magnitude. The rally for the single currency in the US last night was snuffed out by the combination of a late sell off in equities and an expectation that Bernanke’s testimony this evening could very well signal a more hawkish Federal Reserve outlook, with speculation that he might lay groundwork for a tightening of monetary policy.

Yesterday’s markets, outside the late US fluctuations, were largely extremely boring with traders waiting for developments (either good or bad) on the Eurozone Sovereign issue. Nothing much happened. The Spanish Finance minister was in London talking to bond holders and the Portuguese and Greek governments were both vocal in their defence of their respective fiscal positions Data again is light today with UK trades and US wholesale inventories the highlights.

We have already seen the latest survey results from the British Retail Consortium which proved to be a mixed bag. The housing data was stronger than expected with the house price balance rising to 32 in January from 30 in December. A combination of less stock on the market and a pick up in New Year demand to blame ……. This ‘better’ news was countered by a dip in the monthly like-for-like retail sales numbers in January, which produced the worst result since 1995 showing a decline of 0.7%. The market did not know how to react to the mixed news and sterling hopped around before stabilizing at the same levels as before the release.