By FX Empire.com
The pair fell for the second day amid tensions from the euro area which enhanced demand on the dollar as a refuge.
After the rise in Italian bonds to rose once again above 7% which is seen unaffordable at the time of debt maturity. The rise reflects the mounting concerns as the contagion spread from Greece to Italy. Likewise, Spanish auction on short-term debt showed a remarkable rise in interest rates where the 1-year notes climbed to 5%, the highest since 1997, compared with last month’s rate of 3.6% while the 18-month bills jumped to 5.2% from the prior 3.8%. The French yields also witnessed an incline, adding to concerns the debt inferno is spreading to large euro area nations, noting that France has the highest exposure to Greek as well as Italian debt.
Hence, the political changes in Italy and Greece failed to calm down markets as tensions escalated once again.
In addition, fundamentals from the euro area showed a stall in growth at 0.2% in the third quarter and drop in German investor confidence to three-year low, increasing speculations the euro area will relapse into another recession, where on the other hand, the improvement seen in U.S. retail sales and empire manufacturing could not improve the jittery sentiment.
In the U.K., the pound fell after inflation data which showed that CPI fell to 5.0% in October, according to the consumer price index annual gauge, from the highest level September 2008 of 5.2% recorded in September, below forecasts of 5.1%.
King said in his open letter to the Chancellor of the Exchequer, George Osborne, inflation will retreat sharply in the coming six months or so, and continue its fall till it approaches the target by the end of 2012.
With the expected drop in inflation, the BoE may be encouraged to add more to stimulus if the growth pace did not strengthen which in turn will cause the pound to depreciate due to its oversupply.
On Wednesday, U.K. unemployment data will be out at 09:30 GMT, where ILO unemployment for the three months ended Sep. will rise to 8.2% from 8.1% while jobless claims will incline to 23.5 thousands in Oct. from 17.5 thousands a month earlier, whereas the awaited inflation report will be available at 10:30 GMT.
In the U.S., MBA mortgage applications for Nov. 11 will be available at 11:00 GMT. As of 13:30 GMT, CPI for the year ended Oct. is estimated to retreat to 3.6% from 3.9%. Thereafter, net long-term TIC flows and industrial production will be due at 14:00 GMT and 14:15 GMT respectively.
Data from the U.K. is predicted to affect the pair’s movements, not ignoring that the main focus in the markets remains on the latest developments from the 17 nations using the common currency.
Originally posted here
