The size of Europe’s permanent bailout fund, the European Financial Stability Fund, nearly doubled as contributors braced against contagion from any potential fallout from Greece. The increase of the fund raised investor confidence and helped support the euro. All eyes are expected to be on Greece as the government is expected to hold its confidence vote, which is expected to pass. Equity markets across Europe are already called to open higher, which will increase risk appetite and help lift the euro. The UK faces government borrowing data as well as a CBI industrial trends survey. When the data come out in line with expectations the two releases could offset any impact on sterling. In the US, existing home sales figures are expected to show a sharp decline. In Australia, the Aussie dollar fell after the release of the Reserve Bank of Australia’s minutes showed the Central Bank was in no rush to tighten its monetary policy.

Sterling

Sterling suffered losses against a rising euro, but was able to eek out gains against the US dollar. Economic data are forecast to show the UK government’s public sector net borrowing to have fallen slightly from last year’s levels. The decline would be encouraging, but would not erase concerns that the UK government will have a hard time meeting its debt reduction target for 2011/2012.

US dollar

The US dollar faces existing home sales figures. If anything the data will remind markets what happens to sectors of the economy when they are taken off government life-support, which is a theme this week as investors look forward to the FOMC’s policy announcement.

Euro

The European Financial Stability Fund got bigger and lent support to the euro. The surprise move higher came after the euro was knocked initially lower by the decision taken over the weekend to delay a second bailout fund for Greece until July. Guarantees by the EFSF now cover €780 billion instead of the original €440bn. By increasing the amount of the rescue fund, Europeans prepared themselves for any possible contagion that might come from Greece.

Japanese yen

The yen has held steady in overnight markets. The government upgraded its outlook for the economy despite weaker-than-expected trade data. The improved outlook has helped lift equity markets and is weighing slightly on the yen as risk appetite sees investors moving out of yen and into higher-yielding assets.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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