Better than expected economic data released in the US as well as suggestions from one central banker that US interest rates will likely remain at ultra-loose levels for a long time helped turn around broader market sentiment, lifting the US dollar slightly and weakening the yen as well as Swiss franc. Due German ZEW investor sentiment figures could provide a temporary diversions as they are expected to show a slight moderation. Equity markets are expected to open higher, which should help to limit any euro losses heading in to this week’s emergency EU summit.

Sterling

Rupert Murdoch faces questioning in UK’s Parliament. The scandal that has rocked confidence in media and the police is sure to capture local as well as international attention, but to date has failed to influence trade in sterling.

US dollar

Economic data combined with a turn around in negative equity markets helped to shift sentiment. Data from the US Treasury showed that foreigners became net sellers of US assets for the first time in 11 months. However, the data also revealed that China as well as others continued to purchase Treasury Bills, which was an important revelation considering the issues now facing the government.

Euro

The German ZEW investor sentiment survey is expected to moderate slightly this month, offering some small distraction away from the bigger picture which remains squarely focused on the European debt crisis and the outcome of the negotiations over a second bailout package for Greece. The negotiations must bring together a variety of ideas on how to best bailout Greece, without triggering a default rating, while at the same time force public sector participation. There has been some speculation that a small tax could be levied on banks as a way for paying for the bailout. But that is just one of many ideas, including swaps and buybacks. In the meantime, investor confidence continues to crumble in bond markets as Italian and Spanish 10-year bond yields rose above 6 per cent.

Japanese yen

Comments from Finance Minister Yoshihiko Noda continue to influence currency markets. Not only has the Finance Minister intervened verbally in currency markets, but also comments from Bank of Japan’s deputy governor suggest that he too is weighing the impact that a stronger currency will negatively have on the economy. Comments such as these suggest that interest rates will not only remain low, but further stimulus measures could be added to aid exporters facing the crushing pressure of a strong home currency.

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