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Stocks finished sharply higher on Monday, as corporate earnings continued to top forecasts. European banking giants HSBC and BNP Paribas were more than 5% higher on surprising analysts with their earnings and outlook. Commodities were also on the rise, with Crude oil climbing above $81/brl, as investors are becoming more optimistic about global recovery.

EUR/USD

An increase in optimism about the European recovery, following the rally in the banking sector stocks, has helped boost confidence in the common area currency. The euro broke sharply higher against the greenback on Monday, to trade as high as nearly 1.32. Many traders cite the breaking above the 1.3125 level, the 38.2% retracement of the range between November and June, as being a very bullish signal.

Support/Resistance 1.3095/1.3195

GBP/USD

The pound has also benefitted from risk appetite, with the cable moving towards 1.59 when it met some resistance. With the pound also being stronger against the euro, it would ultimately suggest that the future interest rate differential between the UK and the US could be exacerbated even further. This could mean that the BOE could be the first amongst its main trading partners to go on pulling the interest rate increase trigger. As such, the pound will continue to be fundamentally supported on its way up.

Support/Resistance 1.5760/1.5905