European debt crisis takes another twist

could provide more support to the region’s banking sector, fuelling appetite for riskier assets.
The single currency pared a decline versus the yen on a report that the EIB could provide up to 74 billion euros of lending support to the region’s banking sector this according to a Reuters report. The euro had earlier declined as Italian PM Silvio Berlusconi faces pressure to resign.
The euro was little changed at US$1,3787 in New York after falling to as low as US$1,3681 earlier. It weakened 0,3 percent to 107,54 yen. The dollar lost 0,3 percent to 78,03 yen.
The yen was testing 78,00 meaning 77,99 is in the horizon as investors are scrambling for cover in the yen increasing bets that the Japanese currency can touch 77 against the dollar.
The market is also scrambling for any stability in the European banking sector according market watchers and analysts on the trade platform.
The euro-dollar pair has got the market talking for any good news, better headlines to at least boost the currency pair because the market wants to believe that European officials have what it takes to end this crisis. Europe has been the main focus for months now and the commodity story has definitely been driving it as well.
Speculation on political change in Italy and in Greece may help resolve Europe’s debt crisis. At the moment the market is trying to deal with the global economic challenges with volatility having taken a knock-on effect on confidence pushing traders to be cautious across the board.
In London, the pound fell earlier to US$1,5992 against the dollar but trimmed all its losses to trade at US$1,6087 against dollar. The pound declined against the euro as the euro recovered on the backdrop of speculation on political changes in Italy and Greece. The pound was trading at 86,78 pence per euro from 85,97.
The market awaits Chinese numbers on inflation as most economists have predicted a soft landing on their inflation figures. In the South Pacific, the Australian dollar advanced on European Investment Bank that it will provide support to region’s banking sector increasing bets on riskier assets.
The Aussie dollar was little changed at US$1,0353 against the dollar from US$1,0320 to the dollar. The Chinese inflation figures due sometime this week could also provide some cushion for the Aussie dollar if the figures are better than expected. The Aussie dollar is more liquid and more attractive than New Zealand dollar due to better Chinese trade flows.
The European Investment Bank fuelled support for riskier assets after it announced it will support the region’s banking sector. South Africa’s currency the rand advanced to trade at 7,9258 per dollar from 7,9767 per dollar.
The rand also got support after South Africa’s net reserves increased to US$49,49 billion during the month of October. Risk appetite is back on the table pushing investors across the borders to also consider given the fundamental backdrop.
This week sees the South African monetary policy committee meet tomorrow on rate and growth outlook.
Ernst & Young South expects the committee to cut rates and growth outlook on concern that global growth is slowing down and that could affect the rand strength to the downside. Mauritius cut its growth outlook to 4 percent on global slowdown.
Gold is hitting new levels being pushed up by uncertainty in Europe and sluggish data on economies such as the US Demand outlook could be bad but economies such as India and Russia have been driving up gold prices to boost their reserves in commodities.
Gold stocks have become the alternative and the metal has been considered as the alternative currency. The bullion was facing resistance at 1 770,50 before advancing further to trade at US$1 781,60 an ounce in London trade.
Market shocks are being reflected in gold rallies that’s where the smart money is being taken to.
Crude oil advanced to US$95,24 per barrel after earlier falling to US$93,93 per barrel, but consumer demand in the US and better headlines in Europe pushed the price for crude oil to US$95,24 per barrel.
My chart of the day watch out for the gold price in euros could be better in terms of returns.