It is a brand new day dear reader, and the market woke up on the bullish side of the bed today! The support from the American administration and Obama himself to extend tax breaks supported the outlook for the US recovery which helped the market absorb the rejection of EU ministers to expand the aid package as positive, or at least a sign of stability for now!
The finance ministers discarded the pleas from government and central bankers to expand the aid package, where Germany led the hawkish camp and the ministers agreed that there is not need for an immediate aid package for Portugal and Spain, while still also no necessity to expand the stability fund.
Seemingly, the market can rely once again on policy makers, central bankers, and governments to provide the needed sedative to alleviate the pair and suppress the anguish; though likely it is not a magic drug as this optimism is only to last over a slim window of time!
Obama signaled that the tax breaks that are set to expire by the end of this year might extend before Congress adjourns. The sentiment supported the market as we said and surely pressured greenback lower and supported the risk appetite. The dollar index slipped to trade at its lowest today of 79.19 and currently hovering around 79.35 down nearly 0.2% and off early highs at 79.73.
As for the euro, the market ignored the disagreement among the EU members on means to proceed to contain the debt crisis and saw the reluctance as a positive sign, playing down eminent threats for now on Portugal and Germany.
The common currency advanced to its strongest traded today versus the dollar at 1.3395 and currently hovering around 1.3360 where stability above 1.3365 will help the pair continue the upside wave expected targeting 1.3600 areas; where the pair set the lowest today at 1.3274 and the clear stability above 1.3230 will surely keep the bias bullish for the euro.
As for sterling, the mixed industry data did not offset the gains for sterling as the surge in manufacturing activity offset the decline in industrial orders. Sterling rushed to the upside to reach the highest of 1.5821 where stability above 1.5785 can carry the pair further higher to extend to wards 1.5885 and might extend further. The pair recorded the low of 1.5700 today which remains above 1.5690 needed to keep the bullishness valid for now.
Still, further volatility is expected into the session with the continued drive mainly from investors' expectations and sentiment readjustment. Yet, we remind you to keep an eye on USDCAD for today with the rate decision to be announced at 14:00 GMT today as loonie till now is trading with the upper hand and recorded its strongest so far at 1.0012 above the psychological parity levels and as far as trading is steady below 1.0080 the pair will like continue south targeting 0.9925 and 0.9815 unless the BoC provided more surprises and therefore we advice observing the pair closely today.