The pound was mixed during the overnight trade, consolidating against the dollar, but gaining versus the broadly weaker euro as Greek debt crisis intensified. Sterling dropped against the dollar yesterday after UK unemployment figures rose more than forecasted and after Bank of England Governor Mervyn King said policymakers may expand their stimulus program further if debt crisis in the euro region escalate. Overnight, Nationwide Consumer Confidence Index showed that consumer sentiment rose to a five month high in January. The headline index rose to 47 from 38 in December, with a gauge of consumers’ outlook for the economy jumping by 14 points to 64 from 50. The report suggests that consumers are starting to feel the benefits of falling inflation, but project for the sentiment to remain volatile over the first half of 2012. Expect for the pound to remain driven by market risk aversion as there are no economic releases or policy speeches scheduled for today.
Euro dropped against its major rivals before Eurozone leaders meet next week to decide on a 130 billion euro second bailout package for Greece. Some European politicians seems to be in doubt about Greece’s ability and commitment in implementing the austerity program to tightened the budget deficit. German Chancellor Angela Merkel will travel to Rome tomorrow for talks with Italian PM Mario Monti to discuss rescue for Greece ahead of the EU finance ministers summit. Looking ahead to today, France and Spain are scheduled to auction 14.3 billion euro of government debt today.
The dollar gained across the board during the Asian session as European debt crisis deepen and as Moody’s Investor Service said it may downgrades 17 global banks. The ratings for UBS AG, Credit Suisse AG and Morgan Stanley might be lowered by as much as three levels, while Goldman Sachs Group Inc, Deutsche Bank AG and JP Morgan Chase may be cut by two levels. Expect for the dollar to remain supported against its major rivals as increased risk aversion in the markets drive investors into the safety of the US currency.
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