The euro hit its highest level in over a year on Wednesday and shares, oil and metals were also on the rise, as confidence in the global economic outlook strengthened ahead of European data and the U.S. Federal Reserve’s latest policy decision.
The Fed is expected to maintain asset buying at $85 billion a month when it concludes its meeting later and retain its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent.
European economic confidence data for January at 1000 GMT, ECB crisis loan repayments and Italy’s sale of five and 10-year bonds will absorb most of investors’ attention before then, as they look for further evidence of a pick-up in the region.
Share markets in London .FTSE, Paris .FCHI and Frankfurt .GDAXI opened little changed ahead of the data, leaving all eyes on a rally by the euro as it broke above $1.35 for the first time since December 2011.
Alongside the recent rebound in confidence in the euro zone, one of the drivers behind the recent spike has been the eagerness of banks to repay the crisis loans they took from the European Central Bank just over a year ago.
“It (the euro rise) is just a carry on with the current trend, risk is pretty healthy and equities are doing well,” said Bank of Tokyo Mitsubishi strategist Derek Halpenny.
“The danger is European policymakers allow a spike (in euro and market rates) as a result of a removal of one of the principle support measures … With the Fed and the BOJ still easing the euro is clearly the path of least resistance.”
An earlier rise in Asian equities meant the MSCI world share index .MIWD00000PUS was up 0.2 percent at a new 21-month high as European trading gathered pace. U.S. stock futures suggested a cautious start on Wall Street.
Strong U.S. housing data on Tuesday and China’s promising economic growth forecast for 2013 also supported the upbeat mood and raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices and lifting copper.
In the bond market, German Bund futures opened lower as investors made room for a sale of long-dated German paper and braced for solid demand at an Italian debt auction.
Italy will offer up to 6.5 billion euros of bonds maturing in 2017 and 2022. Traders expect the sale to benefit from yield-hungry investors but flagged the risk of indigestion after a bout of buying in recent months that triggered a sharp rally.
“(The auction) probably (goes) alright but I don’t think it trades well afterwards,” one trader said.