Euro pushed up by hopeful money markets

The euro pushed towards a 3 week high against the US Dollar as the markets became more optimistic on a concrete deal by the end of the month for Greece and the Eurozone.  Euro pushed up by hopeful money marketsIMF officials indicated that Greece will get an 8 billion euro loan next month despite the fact that it will miss key deficit targets.

ECB president Trichet also stated that commitments made by Greece should mean that it can avoid default.

This flurry of optimism does not eclipse a still sceptical market, but it has given a boost to the single currency- so far the euro has pushed up over 1% against the USD in early trade.

Despite the above positives for the Eurozone in other news Slovakia voted no to a legislation to increase the firepower and guarantees for the European Financial Stability Facility (EFSF).

All other countries have ratified the changes but resistance from Slovakia has raised tension.

It is expected that another vote will pass the changes tomorrow- however this is at the expense of the opposition getting their back scratched in a coalition reshuffle.

In addition European banks still remain on alert as Spanish bank Banesto missed its profit targets and the Bank Of Ireland was downgraded.  In a nutshell the mix is now good news/bad news as opposed to bad news/bad news and so the Euro has managed a move to the upside.

UK data was again poor this morning with UK unemployment hitting a 15 year high at 8.1%.

The Pound has still managed to push up against the USD this morning- this is tracking the move higher in risk on EUR/USD and is not due to pound strength.

MPC member Dale noted that the vote for more QE in the UK was due to the UK economy slowing in Quarter 3 and the expectation that it will slow on Quarter 4.

Today’s unemployment certainly backs up this slowdown, however the key test for the MPC is whether CPI will remain above 5% for the medium term as the expectation is that it will fall towards 2%.

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