Fiscal Cliff negotiations please the markets

We saw a brief glimmer of hope in
the markets last week as it appeared that the struggling Greeks
will receive the next tranche of aid from their Troika of lenders,
just before it was confirmed the Eurozone was in recession again.
The UK did nothing to help ease the situation posting worse than
expected retail figures and with Mervyn King’s confirming a
negative outlook for the British economy that will likely to drag
on well into 2013.Markets are, however, up this morning after the
initial meeting of negotiations over the US Fiscal cliff started
well on Friday last week giving a late rally to trade on Wall
Street. This has carried over into European trade with GBP/USD over
1.59, EUR/USD sitting just shy of 1.29 and GBP/EUR tightening its
grip on the 1.2450.

The outcome of tomorrow’s EU Summit
will be the big news hitting the wire, where the possible EU-wide
spending freeze will undoubtedly be on the table amongst further
plans for a Spanish bailout and the final sign off of aid and a
GDP/Debt ratio for Greece to be decided.  

The British Pound is likely to
continue its struggle to gain any headway after Governor King’s
negative outlook and poor economic performance likely to keep
demand for Sterling low. A likely mover will be the UK Public
Sector Net Borrowing figure, likely to show a fall in the surplus
this month as the positive effects of the Olympics begin to wear
off.

Notable news today we have US
Existing Home sales, expected to come in on consensus at 4.75m to
continue the economic recovery and remain near the two year high
but this will likely take a back seat until Michigan Consumer
sentiment figure on Thursday and further information on fiscal
cliff negotiations.  

Other news this week is: Tomorrow
minutes and press conference from the Bank of Japan with Fed
Chairman Ben Bernanke speaking after European trade closes.
Wednesday the MPC meeting minutes are released with interest likely
to be on the further QE and interest rate votes. Also, UK Public
Sector Net Borrowing, US Jobless claims (initial and continuing)
and Michigan consumer sentiment. Thursday – Chinese HSBC
Manufacturing PMI, Eurozone Services and Manufacturing PMI with
special attention likely to gather around German and French
figures. Friday we have German GDP and Business Climate Index.