The global equity bourses surged at the start of the week following the agreement for the EU and IMF to provide about 750 billion euros in loans and guarantees to stem the sovereign-debt crisis in the Eurozone. The US stock indexes traded sharply higher with the Dow Jones advancing by more than 3.5% and the Nasdaq surging by over 4.1% by early afternoon trading. Crude oil relinquished some of its earlier gains but remained buoyed by more than 1.6% to the $76.40 per barrel level. The US dollar fell sharply against the euro at the start of Monday trading, sliding to 1.3094 before subsequently recovering from its earlier losses to steady near the 1.28-level.
The rebound in the European bourses, which saw Spain's IBEX 35 surge by more than 14.4% and France's CAC 40 climb by over 9.6%, reflected a sharp easing in market jitters over the European deficit contagion. In addition to the 750 billion euro loan package, the Federal Reserve reactivated swap lines with the Bank of England, the European Central Bank, the Swiss National Bank, the Bank of Canada and the Bank of Japan in an effort to inject additional liquidity and ensure stability in the global financial system.
The British pound continues to struggle versus its major counterparts, slumping to 1.4764 against the greenback amid lingering uncertainties over the UK political outlook as the Prime Minister Gordon Brown said he would be stepping down as the leader of the Labour Democrats. The Conservatives failed to secure a majority last week, resulting in a hung Parliament for the first time in over 30-years.
Cable continues to trade beneath the 1.49-level, hovering around 1.4870 with support starting at 1.4840, followed by 1.48 and 1.4765. Additional floors will emerge at 1.4740, backed by 1.47 and 1.4650. On the topside, resistance will emerge at 1.49, followed by 1.4940 and 1.4980. Subsequent ceilings are seen at 1.50, backed by 1.5040 and 1.5070.
Meanwhile, the US economic calendar for Tuesday remains quiet seeing the release of the March wholesale inventories, wholesale sales and the May IBD sentiment survey. Tomorrow will also see speeches from the Fed's Lacker, Lockhart and Plosser.