Eurozone sovereign debt concerns continue to dominate the markets at present, with broader sentiment being weighed down on the prospects that a timely and acceptable resolution to these problems will not be achieved at anytime in the near future. This has weighed heavily on the Euro over the past several days, while all other major currencies have also traded lower against the buck in sympathy. Also seen weighing on global sentiment have been fears that China will continue to take measures to tighten monetary policy and curb growth on escalating concerns over rising inflation. This has contributed to a decline in global equities and commodities prices, with the Greenback also very much benefiting from these fears.
So far in early Wednesday trade price action has been less than compelling, with all of the major currencies consolidating their latest setbacks against the US Dollar. But any mild bids that have been seen in currencies, have been attributed to some accommodative comments from various Fed officials, with Fed Rosengren, Evans and Lockhart all more than expecting the Fed to fully utilize the $600B in additional quantitative easing. Still, with the broader negative sentiment, negative Eurozone and negative China forces at play, we see the risks for additional upside in the Greenback over the coming days, with 1.3335 the next key level to watch in Eur/Usd. As such, our recommendation would be to continue to look to sell currencies on overdone intraday rallies against the buck.
Looking ahead, the Bank of England Minutes and UK employment data (6k jobless claims change expected, 7.7% unemployment expected) is due out at 9:30GMT, followed by Eurozone construction output at 10:00GMT. US equity futures are tracking moderately higher into the European open, while commodities trade flat and consolidate their latest declines.
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