Riskier currencies like the EUR and AUD rose in European trading Tuesday while the greenback was under broad-based pressure as the London market kicked off 2012 in a mildly upbeat mood, helped by a run of encouraging global economic data.
But nagging worries over potential sovereign rating downgrades in the Eurozone and continued concerns over the heavy borrowing requirements of some euro-area member states kept a cap on gains.
The EUR climbed to as high as $1.3041 against the USD, having dropped Dec. 29 to a 15-month low of $1.2858, while the AUD pushed above $1.03 as traders took account of a mildly improved economic picture in Asia and Europe, ahead of key U.S. manufacturing figures due later in the day.
Data showing Australia’s manufacturing sector expanded slightly in December added to the favorable impression created by earlier Chinese data which showed manufacturing activity swinging from a contraction to a mild expansion.
The GBP also got a lift after a U.K. manufacturing activity survey, which showed the pace of contraction slowing in December.
Adding to the upbeat tone were successful Belgian, Dutch and Hungarian short-dated debt auctions, which passed off smoothly, leaving peripheral euro-zone bond markets broadly steady in quiet trade.
Even so, traditional haven currencies, like the CHF and JPY, also gained against the USD, suggesting investors remained wary of piling wholesale into currency bets that are deemed to be risky, as did rising tensions between the U.S. and Iran, which helped to push up Crude Oil prices by more than 2% Tuesday.
Coming in addition to a French treasury bill auction at 1350 GMT is the monthly U.S. ISM manufacturing activity survey at 1500 GMT. Economists expect U.S. growth to accelerate further in December, and have penciled in a reading of 53.5, up from 52.7 in November.
The minutes of the U.S. Federal Open Market Committee will be released at 1900 GMT and some strategists are expecting them to reveal details about a potential communications policy revision ahead of a formal announcement at the January FOMC meeting. Updating the view on rates has become an important part of Fed discussions about how the central bank explains its goals and policies to the public.
EasyForexNews Research Team