Risk Appetite Reemerges on Greece’s New Rescue Deal Yet Gains Seen Limited

After E.U. leaders agreed onGreece’s new bailout plan which eased concerns over the outlook of the European debt crisis, confidence was boosted and risk appetite spread within the global markets increasing demand for higher yielding assets.

The euro-area officials announced yesterday reaching a deal on Greece’s second bailout plan worth 159 billion euros which also includes replacing existing bonds with new bonds at a lower interest rate and longer maturities.

The deal also included other debt-laden nations including Ireland and Portugal. This helped the Asian and European equities to turn green, while the euro rallied this morning to a two-week high against the dollar.

The quarterly earnings from the States continue to be positive, which is giving an additional support to confidence across the broad markets. Thereby demand on the safe heaven gold fell today and yesterday and is trading around the $1588.00 level as of this writing.

Crude oil touched today the highest of $99.81 per barrel level as contagion fears across the European countries such asIreland,Portugal,ItalyandSpainfell considerably, and now oil is consolidating around the $99.40 level.

Yesterday’s news eased concerns over the outlook of the European debt crisis, however theU.S.lawmakers continue to negotiate a deal to raise the debt ceiling and reduce the deficit, which is keeping markets cautious.

If the Democrats and Republican will agree on a deal then traders will target higher yielding assets since risk appetite will increase. However investors must eye for now any statement coming from the major rating agencies since they could have other sayings aboutEurope’s debt crisis.

Today Europe released a positive industrial new orders report, yetGermanydisappointed with a lackluster Ifo business climate report. This managed to limit the euro’s gains, especially since the single currency found a resistance at 1.4420 which pushed it down to the 1.4400 level.

The pound lacked the fundamentals today, yet the currency fell slightly since it continues to move in a euro centric mode. The yen weakened and as of this writing is trading around the 78.50 level as demand fro safe heaven weakened.

TheU.S.will lack the economic data today, yet traders will turn their focus toCanadasince the economy will release the CPI report for June as well as the retail sales report for May, both expected to weaken.

The dollar index is trading around the 74.00 level, slightly better than yesterday when it was severely punished by the news coming from Europe. Markets may continue to be swift and volatile ahead of the weekend, awaiting an agreement from the U.S. lawmakers.