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European markets to become volatile

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Pound Sterling

The Pound has strengthened to a three-week high against the Euro due to the single currency being dragged down by waning investor confidence. The fallout from the Italian Prime minister, Mario Monti’s announcement that he would resign has caused the European markets to become volatile. As a result of the uncertainty the Euro slipped by 0.2% dropping to 80.37 pence against the Pound.

Against the Dollar the Pound has made some gains due to an increase in risk sentiment as a result of the US posting strong economic data. Worries over the ‘fiscal cliff’ continue however, making the currency pair volatile at best.

US Dollar

The ‘Greenback’ is trading bearishly due to the deadlock over the ‘fiscal cliff’ negotiations. President Barrack Obama and US Congressional leaders have been unable to progress in their talks and with time running out the markets are becoming increasingly nervous. As a result the Japanese Yen made gains at the Dollar’s expense as investors sought shelter in an alternative safe-haven currency.

Today Dollar traders need to pay attention to the release of the latest Trade Balance Data that is due to be released later this afternoon. Analysts are predicting that the data will come in at -42.4 signalling a contraction. If the figure is worse than expected then we can expect the currency to suffer and extend its bearish trend against the Yen.

The Euro

The Euro has dropped to a three-week low against the Pound and fallen to a four-week low against the Japanese Yen. Against the US Dollar it hit a two-week low. The announcement that Italian Prime Minister Mario Monti would resign ahead of the country’s next election has led investors to seek shelter in safe-havens whilst they assess the impact the announcement could have on the Eurozone.

Today’s key Euro data is the release of the German ZEW economic Sentiment figure which analysts are predicting will come in at -11.4. A better-than-expected figure could calm the market’s nerves that the European Central Bank could soon cut interest rates.

Australian Dollar

The ‘Aussie’ has declined against all 16 of its major peers due to business confidence dropping to its lowest level since 2009. The National Australia Bank said the confidence index dropped to -9 in November from -1 in October.

The currency remained relatively firm against the US Dollar amid bets that the US Federal Reserve will add more monetary stimulus to the nation’s economy.

New Zealand Dollar

The ‘Kiwi’ has hit its highest level in five-weeks against its Australian cousin after house prices in the country rose last month at their fastest rate for five years and consumer spending via debit card increased from the previous month.

Canadian Dollar

The ‘Loonie’ has risen to a seven-week high against the US Dollar as the government approved a multi-billion corporate takeover. The currency has risen for a fifth day against the US Dollar and strengthened against all 16 of its major peers due to better-than-forecast factory data out of China signalling an increase in demand for Canadian commodities.

South African Rand

The Rand has firmed marginally today as the markets await the release of a number of economic data releases. The currency is also being supported by a calming of nerves over the Eurozone and the prospect of the US Federal Reserve implementing further monetary easing measures. So far this year the Rand has lost more than 7% of its value and came under pressure in August due to the wildcat strikes in the nation’s key mining sector.

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