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| The Daily Forex Brief is written by FxPro's team in the City of London. Visit fxpro.com for more news, FX commentaries, Business Center TV, real-time feeds, calculators and tools. |  | ||
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| Daily Forex Brief | |||
| If the skies looked dreadfully dark throughout August and September then the investment weather has turned decidedly brighter this month. As Friday's stronger-than-expected US retail sales figures showed, the US economy is not heading into recession any time soon. Major central banks are bending over themselves to create the right financial conditions through either conventional or unconventional means. European policy-makers (and the IMF for that matter) understand the urgency of recapitalising Europe's major banks; for now at least the exact details on how this is going to be achieved can be left for another day. Plus it now appears that Europe will probably allow Greece to default on most of its debt (see below), which is sensible because Greece has no realistic prospect of paying the money back anyway. Finally, risk managers are shutting down their books as calendar year-end approaches. In response, risk appetite strengthened further on the final day of the week, with European equities up 1%, the Aussie up above 1.03, oil up two dollars and the euro near 1.39. Bond yields soared ? the French 10yr yield jumped 17bp at one stage to 3.11% - while the US 10yr yield is now 2.25%, up 50bp in just five trading sessions. Evident on Friday were some further asset allocation switches, out of bonds and fixed income into equities. This is not surprising given that the equity risk premium on offer recently has been at historically high levels, making equities exceedingly attractive in relative terms. | |||
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