New optimism for Europe

The Euro found support earlier today after economists predicted that contraction in manufacturing and services in the currency bloc would slow.

 

This followed the release of a report on Tuesday which showed that German investor confidence has climbed to its highest level in 30 months.

Markit Economics is set to release data of a composite index, which is based on a survey of purchasing managers in manufacturing and services, on Thursday. This is expected to show a gain to 47.5 in January from 47.2 in December. Any reading below 50 signals contraction

 

Any signs that the Euro-zone recession is easing, albeit at a slow pace, are sure to be positive for the Euro. In fact some, economists are now expecting even stronger signs of growth in the European economy by mid-2013.

European Central Bank President Mario Draghi announced on Tuesday, that in his view the "darkest clouds" over the Euro region have receded. This he said, was due to decisive policy steps that were taken in 2012

 

In the U.K., Prime Minister David Cameron is set to promise a referendum to decide on whether the U.K. should leave the European Union. This has seen the British pound trade close to its weakest level to the Euro since February, at 84.06 pence per Euro.

The Yen rose for the third consecutive day on speculation that Japanese consumer price data, due for release on Friday and expected to show a 0.2% decline in December from November, is set to add to evidence that the Bank of Japan's (BOJ) monetary stimulus is failing to stoke inflation.

The BOJ had raised its price gain target to 2% on Tuesday and also announced that open ended asset purchases will start in 2014.

The Yen was earlier higher by 0.5% to 88.23 per Dollar and climbed by 0.6% to 117.43 per Euro.

 

As a result of the Yen's strength, the Euro was forced lower against the US Dollar. The greenback however, failed to capitalize after stronger than expected German economic sentiment data was released on Tuesday.