Daily Market Report 02/02/2012
As February gets underway the markets seem to be carrying on the bullish momentum from January getting a boost from some upbeat global manufacturing data despite the deepening euro zone crisis. An agreement on the private sector involvement in the second Greek breakout remains elusive, after plenty of deadlines have already come and gone with no tangible results. Investors appear willing to brush aside the debt crisis, as risk sentiment remains well supported. The bulls pushed European shares to a new six-month high in early trade, but at the time of writing markets are suffering from a little bit of profit taking. As the buying momentum is drying up the FTSE 100 is drifting lower at 5770.
In line with global equities pushing higher the euro managed to pick up momentum yesterday with the EUR/USD spiking over the 1.3200 figure, but could not sustain the move and plunged to a low of 1.3028 before leveling off at 1.3173. This morning the bears are dragging the euro down. The key level to watch over the coming session comes in by 1.3212 as a break above should accelerate gains. Any actualization of the Greek PSI agreement could act as a catalyst for the next push towards 1.3357.
Carrying on the bullish trend, gold got another boost yesterday, rallying 13 bucks to close at 1.743, hitting its higher level in nearly two months. This morning the precious metal is creeping ever higher giving the bulls hope that this grind higher could continue to test all-time highs. Investors are now eyeing the release of US jobless claims to gauge the health of the US economy. Brent continues to be propped up by the geopolitical tensions extending its gains for a third day on worries over supply from Iran and buoyed by upbeat global manufacturing data. At the time of writing, Brent is up on the day at €112.15.
The economic calendar today may serve as another driver of renewed downward pressure on the Euro with PPI figures expected to see inflation drop to the lowest in 14 months. During European hours investors will be closely watching the French and Spanish bond auctions as a measure of solvency risk in the markets. Later in the day, the focus turns across the other side of the Atlantic, where the FED Chairman testifies before the House of Representatives on the state of the US economy. If Bernanke appears more dovish than what has already been priced in, the US Dollar is likely to come under further pressure.