Positive Greek bond buyback compounds German economic sentiment

Wise Money Markets in Europe have gained momentum and surged to an 18 month high following the German ZEW economic investor confidence figures released yesterday which showed a jump in December way above market expectations.Positive Greek bond buyback compounds German economic sentimentThe cause was supported in the Eurozone by renewed optimism that Greece has been successful in drawing enough bonds to its sovereign debt buyback to ensure further aid requirements are unlocked by the IMF and EU.

Although the bids attracted €31.8 billion, the price paid for the bonds were higher than expected, meaning the reduction will fall short of expectations.

Consequently, this means that the debt to GDP ratio will be reduced to 126.6% in 2020, contrary to the forecast of 120%-  the currency has raced up to 1.30 levels against the US Dollar.

This positive sentiment in the Eurozone led Spanish borrowing costs to fall, however there are still concerns over the political instability in Italy, which did not seem to stop the surge in the single unit currency.

Over to the US, markets are still trading with cautious fervour as speculation continues to mount that the US Federal Reserve will add to its monthly bond purchases with further QE which also led the currency to weaken.

We still await the results of the 2 day Fed meeting that begins today to hear further details, where they will announce $45 bn of Treasury bond buying.

Though the economy seems to be gradually improving, the Fed continues to add stimulus but may be faced with higher inflation and a weaker dollar in the near future.

The US fiscal cliff talks are also still being discussed as they try and reach an agreement as to the measures taken to reduce their debt, set to come into force in January.

Positive sentiment from the Eurozone coupled with speculation of QE in the US, led Sterling to strengthen against the Greenback as we breached the 1.61 level.

We also expect unemployment figures from the UK later this morning, expected at 7.8%. Any figure that comes out higher than this could lead to a bit of weakness in the pound.

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