European Sovereign Debt Risk Concerns continue to dominate headlines

Foreign Exchange Rates Currency News - European Sovereign Debt Risk Concerns continue to dominate headlines

by Tom Trevorrow

With a new year brings fresh optimism and of course fresh problems for financial markets which have started the new year with a slightly defensive tone. Euro zone sovereign debt risks remains the dominant theme for currency markets as trading gets underway for 2012 with aggressive selling against the Euro already witnessed in early morning trade.

Sterling hovers close to a year high against the Euro as improved risk sentiment prompted some investors to close bets on more losses for the pound ahead of data on UK manufacturing. There is still an underlying bias towards short selling the euro with the Pound consolidating around 0.8368 with a high of 0.8333 (1.20).

The pound gained around 2.5 percent versus the euro over 2011 and has risen from above 86 pence per euro in early December, gaining as investors sought alternatives to an under-pressure single currency. Although most safe heaven currencies normally include the USD / CHF and JPY, at times Sterling is also sought as an alternative. Many are skeptical that sterling can be considered a safe haven asset, however, given the fragility of the UK economy and its debt levels, which are still high despite government austerity measures aimed at reducing the country’s deficit.

Europe’s sovereign debt risk concerns will continue to dominate the headlines, with heavy first quarter borrowing to refinance maturing debt expected to push the euro lower and undermine demand for the region’s lower-rated sovereign debt. Therefore any buyers should look to take advantage of the highs and sellers should remain cautious of further aggressive selling – STOP loss orders are a good way to minimize losses for sellers and Limit orders are an excellent way for buyers to take advantage of any early morning movement or overnight activity.

Looking elsewhere across the financial markets , a surprise lift in Manufacturing and a unexpected drop in German unemployment headlines the economic calendar which has helped lift global stocks in early morning trade. German unemployment fell more than expected in December, by 22,000 from the previous month to a seasonally adjusted 2.888 million, with the jobless rate edging down to 6.8 percent from 6.9 percent in November – a new record low since figures began.

The euro rose about 0.8 percent against the dollar to around $1.3058, but stayed within its 3 week moving average with support at $1.2858, which is still a clear target point for speculative positions. Other movement to take note of in early morning trade is that of the higher yielding currencies (AUD / NZD) – The Australian dollar making a positive start to 2012, posting a record high against the euro and touching a one-month peak against the US dollar as positive manufacturing data from China boosted investor sentiment. The Australian dollar broke through 102 US cents against the USD, as market players enjoyed positive Chinese figures from the weekend. This level is seen as a significant support level for the AUD/USD and therefore this may open up the way for further buying in favour of the AUD through intraday trade.

Sterling also trades down against the higher yielding AUD and NZD, with 1.5080 (support ) currently being tested – down 0.57% on the day. The GBP/NZD has also seen some heavy selling, with a break of the key 2.00 psychological level against the NZD – down to 1.9774 (low) -0.61% on the day.

Related posts:

  1. The Euro continues to suffer from fallout over the series of European sovereign debt stories
  2. Pound Sterling to US Dollar Foreign Currency Exchange Rate Forecast – Sterling edges higher as US debt talks stall
  3. Sterling to US Dollar and Euro exchange rates NEWS FLASH – UK retail sales plummet, as concerns in Europe escalate
  4. The Pound encounters strong resistance against the Euro and the Dollar as concerns over the UK debt position increase
  5. The Pound rallied against the Euro yesterday amid concerns that the U.S government’s plan to buy $700 billion in bad debt with fail to bolster growth

Article source: http://feedproxy.google.com/~r/ForeignExchangeOutlook/~3/uZjxxz3xmiI/

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