Europe’s efforts to contain the debt crisis, the French-German pledge to help banks by the end of the month and the help given to Dexia to avoid bankruptcy, fueled optimism in the markets this morning. Yet as investors await a vote from Slovakia on the European bailout fund, tensions and caution increased demand on safe haven.
Since sentiment is not sustained by strong fundamentals and the third quarter earnings season will start this week, where JPMorgan Chase & Co. will be the first U.S. bank to present its results on Oct. 13 and expectations are for a decline in its earnings, volatility may persist.
Today, Slovakia’s parliament will vote on the European bailout fund, where all the euro governments agreed on the EFSF ratification, and officials are awaiting for the Slovak agreement to proceed with implementing the plan. Meanwhile European leaders decided to postponed Oct. 18th summit to Oct. 23rd since the Greek bond writedowns may exceed 60%.
Asian stocks continued today their upside rally sustained by Europe’s pledge to help banks, where the MSCI Asia Pacific Index rose today by 2.2% at 14:10 in Tokyo, yet the European stocks fell ahead of Slovakia’s vote, where the FTSE 100 fell as of this writing 0.68%, DAX fell 0.66% and CAC 40 fell 1.06%.
Europe’s economic data are limited today to UK’s industrials production for August which rose by 0.2%, yet the manufacturing production fell to -0.3% adding more downside pressures on the pound, which is trading as of this writing around the 1.5620 level.
Demand for safe haven is intensifying , thereby the dollar index rose from the lowest of 77.48 to the highest of 77.84, while the euro is falling and as of this writing is trading around 1.3590. The yen is moving in a tight range around the 76.70 level, and the CHF is trading around 0.9060.
The dollar’s incline is imposing downside pressures on the commodities as well, where gold is trading around $1656.80 while oil is trading around $84.50. The AUD also fell today trading around 0.9915. Markets are also awaiting the release of the FOMC minutes scheduled for later tomorrow to get more signs on the health of the U.S. economy.
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