Aussie Leads Risk-On Rally as German Courts Approve ESM
Today’s European session clearly saw a reverse in traders’ sentiments as risk-positive developments unfolded. Germany’s top Federal Constitutional Court decided that the parliament’s approval of the ESM bailout fund should be respected. At the same time, a 1% growth in UK industrial production was reported for May, beating expectations for a 0.2% drop in output. The surprisingly good data should be viewed hesitantly, as the boost was most likely due to an addition of one work day to May, when the UK postponed a national holiday to June; and therefore is unlikely a sign of economic turnaround.
These two bullish news items out of Europe brought the biggest gains for a non-European currency. The Aussie bounced over 80 points from a session low, as traders took profit from Aussie shorts set last week. The risk-on sentiment change also boosted major European currencies and the Pound erased most of the losses that resulted from poor the US jobs data, which was released last Friday. EURUSD is still lower than where it was trading before the US data release.
In other European news, French production dropped more than expected in May, and Italian production was also lower. These news items did not notably affect currency trading.
From here, traders will be looking towards tomorrow’s Fed minutes release from their June meeting, in which traders will look for signs for a QE3.
AUDUSD 15-minute: July 10, 2012
--- Written by Benjamin Spier, DailyFX Research
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.