Money Transfer News: Australian Dollar Boost, Euro Remains on Front Foot vs Pound Sterling

Risk appetite came back into the markets with a vengeance after the sell-off on Monday.

In New York, the Dow Jones Industrial Average rose to 14,254, its highest level in its 116-year history. London followed, closing yesterday at 6,432, extending Tuesday's gains into near record territory.

Worldwide stock markets have been propelled upwards by a combination of comments out from US Federal Reserve Chairman Ben Bernanke who reassured markets that the Fed’s Quantitative Easing program is far from over, a raft of upbeat company results and a better than expected Markit/CIPS service sector purchasing managers index for the month of February.

"A slowly improving US economy and a pledge by the Chinese to increase their fiscal deficit to ensure a 7.5% growth rate, while still low by historical standards, helped further turbo charge markets yesterday, in the wake of the dovish comments by Fed Vice Chairman Janet Yellen late on Monday," commented Senior Market Analyst Michael Hewson from CMC Markets.

The pick-up in sentiment is helping the pound recover from its recent 31 month low against the dollar as a rise in risk appetite diminishes demand for safe haven capital flows into the US dollar.

It is also helping the high yielding currencies like the Australian and New Zealand dollars.

The Aussie received a further boost last night when data showed a better than expected 0.6% pick up in Australian GDP.

The euro remained on the front foot against the pound yesterday after data from Markit showed that the euro zone downturn was not as bad as preliminary data had originally indicated but the slowdown continues despite growth in Germany.

Markit reported yesterday that the euro zone PMI composite output index advanced from the 47.3 estimate to a final figure of 47.9 in February but this is still below January's reading of 48,6.

Markit notes that the steepening of the downturn in activity contrasts with the easing trend which had been evident in the last three months of 2012.

Markit Chief Economist Chris Williamson commented that the dip in the February data “is a disappointment”, he noted that on the bright side it implies a “much smaller” drop in this quarter's GDP than seen in 2012.

Williamson continues to express concern about the divergence in member states. “Worryingly, the divergence between Germany and France so far this year is the widest in the 15-year survey history. Germany is on course to see the strongest quarterly growth since the spring of 2011, but France is contracting at the fastest rate for four years,” he said.

Even as PMI data showed a continued downturn in the euro zone this morning, the area managed to beat consensus estimates with its latest retail sales numbers. According to the data from Eurostat (the statistical office of the European Union), January retail sales increased by 1.2% month-on-month in the euro area, a sharp increase following the 0.8% drop registered in December 2012.

The big event this week remains tomorrow’s policy announcements from both the Bank of England and European Central Bank’s and Friday’s Non-farm payroll (unemployment) data from the US,