Euro Shrugs Bailout Tensions on New French Budget

Euro shrugs off Greek bailout tensions, France announces a new austerity budget with tax rises, sterling slides ahead of CBI sales data , gold continues to fall after margin hike, US weekly jobless claims. 4 New Premium remain progress.

The single currency continues to remain immune to the soap opera playing out in various countries around Europe, with respect to not only the Greek bailout, but also increasing tightness in the credit markets within Europe. The euro also shrugged off some very disappointing economic data suggesting it is becoming somewhat Teflon coated.

The ECB was rumoured to be once again buying Italian bonds yesterday, which if they were didnt do too much to alleviate the downside pressure on yields, finishing as they did higher on the day above 5%.

The German president even waded into the row surrounding the ECB bond buying program, following the Bundesbank lead in questioning the legality of the action. Continued calls from with the German government of the need for collateral in exchange for any new Greek loans continue to highlight the divisions within government and point to a very rocky road ahead.

German Sep Gfk consumer confidence slipped to 5.2 from 5.4 vs. expectations of 5.1

France yesterday announced a new austerity budget of 11bn worth of tax rises in an attempt to try an reduce its budget deficit to 4.5% of GDP by next year and 3% of GDP by 2013. The French PM also downgraded the 2011 growth forecast from 2% to 1.75% in the wake of the last quarters disappointing GDP numbers.

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Despite all this negativity the euro powered higher against the pound which has slid back all week, despite some fairly encouraging data from the CBI, with today seeing reported sales for August. This month could well be a disappointing number given the possible fall-out from this months riots with expectations of a fall to -10 from -5. Elsewhere Nationwide reported that UK consumer confidence fell in July to a 3 month low, but still came in above expectations at 49.

Later in the day MPC member Martin Weale is scheduled to give a speech in Doncaster, where the markets could well find out his reasoning for changing his vote at this months meeting of the MPC, from voting for a rise in rates to leaving them on hold.

Gold continues to fall overnight after the surprise 27% margin hike by the CME after the close.

After yesterdays positive durable goods data investors will be hoping for some positive weekly jobless claims with expectations of a fall from last weeks slightly worse than expected number.