For the third consecutive day, commentary out of the Euro-zone guided global markets. Higher yielding and riskier assets, such as the Australian Dollar and the Euro, continued to find higher bids on Tuesday, well-supported throughout the Asian and European sessions following developments surrounding European sovereign debt woes yesterday. The two highest yielding currencies, the Aussie and the New Zealand Dollar, were the best two performing major currencies against the U.S. Dollar, up 1.10 and 1.41 percent respectively, at the time this report was written. The higher yielding assets have continued their rebound after their sharp sell-off last week, when the Federal Reserve announced it would not inject any new funds into the financial markets.

Indeed, the developments yesterday mark a positive shift in process and rhetoric out of Europe. Throughout the summer months, little but words emerged from meetings between European leaders. Now, with what appears to be a credible plan in the works, in the form of a European version of the American Troubled Asset Relief Program, markets are finding the threat of a Greek default less daunting than before.

The euro made some further modest gains yesterday, especially versus the dollar, as markets hope that the EU authorities will come up with a wide ranging solution to the regions debt problems. Equities and other riskier assets also rose in price. Sentiment remains fragile, nonetheless, so these gains may prove short lived.

Meanwhile, hopes of an imminent cut in interest rates from the ECB were dented somewhat yesterday by data showing much stronger than anticipated growth in the regions monetary aggregates over the month of August. The annual rate of growth in M3 accelerated to 2.8% from 2.1% in July, with growth in loans to the private sector up 2.6% compared to 2.4% previously. The numbers, combined with Monday’s smaller than anticipated fall in the September German Ifo index, means that calls for a near term rate cut could be well wide of the mark. Indeed, one ECB committee member warned earlier in the week that speculation of a rate cut at next week’s policy meeting was “wild”.

Although off recent lows, sterling remains pressured versus the USD on expectations of further QE from the Bank of England. Trading versus the euro remains choppy and currently trades down on the day by approx 0.4% from the overnight high providing an opportunity for Euro sellers. The dismal outlook for the UK economy was further underlined yesterday by a poor CBI distributive trades survey for September, which showed retail sales weakening at their fastest pace in 16 months. High street stores, meanwhile, expected little improvement in October as they expect consumers to continue to cut back on spending. There are no UK data of note today, with international events and general market sentiment likely to set the tone for sterling.