Sterling and euro rise in spite of closed European markets

04-13-2009 15:03

During last night’s session the euro reached a 1.3216 level as it began to obtain a bid tone after it reached a low of 1.3126 during the Asian trading session. The single currency has remained its high-yielding status and continued to find support as a result of rising optimism, although the European Central Bank reduced the benchmark rate to 1.25% at the previous policy meeting. The central bank would leave rates unchanged at the next meeting but would think of non-standard actions according to president Trichet. The situation of the European economy continues to worse through which speculations of more measures by the committee are rising and could influence the pair. Still, the 100-Day SMA at 1.3184 keeps adding technical support to the EUR/ USD. Should the pair drop below this level it may lead to a decrease to 1.2500. Despite an empty economic calendar and closed London markets the pound went up to 1.4750 versus the dollar. As a result of a lack of major fundamental data this week, considerable volatility is not very likely. For that reason price action could be boosted by the broader theme of risk appetite. Interest rate expectations should not be an issue, which is proved by the fact that the BoE did not change its benchmark rate at 0.50% and by the prospects that two months could be necessary to finish their present quantitative easing plan. The 100-Day SMA keeps on adding support for the GBP/ USD at 1.4552 and the 20-Day SMA close to exceed proves another bullish signal for the pair.

US domestic growth spurred?

After earlier losses the dollar starts to find support as US markets resume trading after the Easter weekend. Nevertheless, many trading desks will no be fully staffed, which could lead to light volume. This day will not feature any event risk as the economic docket is empty. Still, tomorrow’s advance retail sales figures are expected to result in a 0.3% gain. The present trend of recovering fundamental data could be reinforced by improving consumer consumption. Internal growth in the US could be supported by easing credit conditions, the stabilizing housing market and rising optimism. Nevertheless, the earnings calendar could provide a clear picture of a possible economic recovery and will clarify the level of potential demand. However, markets are already trading on tomorrow’s release of the Goldman Sachs reports. The greenback could be weak on the short-term and stock markets could continue last week’s gains if more indications of increasing profits are provided.