Euro: Alternatives for the ECB (page 2 of 2)

GfK Consumer Confidence hit a record low as worries of high oil prices, turbulent housing market and tight lending conditions took its toll on the locals.

Markets reacted sharply to this unexpected drop, as the realisation of turbulent times ahead dawned on investors.

Record low Mortgage approvals raised further concerns amongst traders who know that the housing market is the Achilles heel of the UK economy.

Looking ahead, Nationwide Housing Prices and Manufacturing PMI figures are expected to show further weakness, but we actually think that the manufacturing data could improve given the rise in the CBI industrial trends survey. If this is true the British pound should continue to rally.

Australian Dollar hits new 25 year high, Canadian Dollar collapses

The Australian Dollar hit a fresh 25 year high against the greenback before reversing violently to end the day lower.

Expect the volatility in the Aussie to continue with manufacturing sector PMI and the Reserve Bank of Australia interest rate decision scheduled for this evening.

Even though the RBA is not expected to alter interest rates, the recent price action of the Australian dollar suggests that the market expects hawkish comments from the central bank.

According to the TD Securities inflation index, price pressures continue to grow, which validates the recent speculation.

Meanwhile New Zealand is the only commodity producing country to end the day stronger against the greenback. Business confidence has improved significantly with the NBNZ confidence index increasing from -49.7 to -38.7.

The Canadian dollar on the other hand completely shrugged off its better than expected Q2 GDP numbers and higher oil prices. Profit taking on the last trading day of the year and ahead of Canada day (Tuesday) is the only reason to explain today's move.

Japanese Yen: Quarterly Tankan report on the calendar

The volatility in the Dow has caused a significant amount of volatility in the Japanese Yen crosses.

The US dollar broke below the 105 level shortly after London opened but ended the day higher against the Japanese Yen.

Aside from NZD/JPY, the other Yen crosses ended the day the lower. The JMMA Manufacturing PMI figures fell to a six year low, along with depressed Housing Starts and Construction Orders.

Looking ahead, the Quarterly Tankan report which measures business confidence is due for release. Given the slowdown in the global economy, the market expects business confidence to deteriorate materially.