The US dollar has lost some ground after data releases overnight even though the corporate earnings data from the US was positive.US house prices came in better than expected as well, however the markets seem to be trading the negative consumer sentiment in the US.
US consumer sentiment came in at 58.6 though they expected the figure to be closer to 64.0.
Risk appetite seems to be back on, ever so slightly, as investors are cautious ahead of the FOMC meeting where the Federal Reserve are expected to outline interest rates and stimulus packages, though it is widely expected that they will continue to buy assets until next year.
We also expect US GDP data which is out before the meeting, which would provide a more clear direction to the markets.
From Europe, German consumer confidence data, which seems to be on a high in the new year, has propped up the euro to an 11 month high against the Greenback as it currently is trading over the 1.35 level.
Spain’s recession has deepened more than expected as per estimates in the fourth quarter as the government struggles to rein in the euro region’s second-largest budget deficit.
In the 3 months to December, GDP fell 0.7% as the European Commission has signaled that it may recommend easing Spain’s budget goals as unemployment in Spain creeps to it’s highest level.
A weak USD has seen the Pound recover, albeit temporarily, back up to 1.5750 after it reached a 5 month low yesterday to 1.5675.
However, UK growth concerns continue to build pressure on Sterling.
Though the BOE issued a statement saying the economy may not reach growth levels of 2% for another 3 years but in the long term, they remain optimistic that the economy should return to earlier growth levels.
The comments, not backed by any form of data fails to instil any confidence in the markets as the pound could face further weakness in the first half of the year.