A risk-on attitude seems to have grasped the markets over the past 24-hours and the influence can be clearly seen in currency trading, as the risk-correlated Euro and sterling set new highs. Signs of risk appetite could be seen in equity trading, as the S&P climbed 1.15% in yesterday’s trading, and today European equities are showing decisive gains across the board.
The Euro set new 7-month highs in today’s European session, most of the gains came shortly after the better than expected IFO German business sentiment survey. However, the reaction was delayed and may have been more of a reaction to general risk appetites.
The rise in Euro happened at the same time a sudden rise in Greek bond prices led to what has so far been a 64 basis point drop in today’s trading. The rise in Greek bond prices follows the overnight S&P upgrade to Greek bond ratings. Greece’s sovereignty rating is now at B- with a stable outlook, up from a selective default rating.
The British Pound set a new 3-month high against the US Dollar in today’s session following the release of the BoE minutes, which said that the vote to not raise asset purchases was 8-1. The yearly GBPUSD high currently sits at 1.63009.
Also in today’s session, ECB’s Praet told the publication Le Firago that the threat of exits from the Euro has vanished. He also said that France needs to reform before the market attacks, as public spending is still too high.
Outside of Europe, Japan PM Elect Abe said that monetary policy is not enough to beat deflation or correct a strong Yen. In New Zealand, Finance Minister English said that the country doesn’t have the tools to move its currency to a certain level. The New Zealand gross domestic product is set to be released later today.
EURUSD is currently trading around 1.3270, and the pair could find resistance at a previous high of 1.3284. Support could be provided by a previous resistance around 1.3154.
EURUSD Daily: December 19, 2012
--- Written by Benjamin Spier, DailyFX Research