UWC Currency - page 18
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16.11.2011
Asia lower on
fear for Italy
Asian exchanges continued down this morning with Nikkei falling 0,92 % on fear that the sovereign debt crisis in
Europe is running out of control. In the US both the latest manufacturing and consumption indexes were slightly
up, creating hopes that the US economy shall avoid a double dip recession. Technology stocks were strong with Nasdaq up 1,09 %.
USD is strengthened, and Euro/USD fall to its lowest level in 5 weeks trading at 1.3437. USD/JPY stabile at 77.04. Oil prices
which climbed in US trade are falling back; NYMEX at 98,75 and Brent 111,60. Gold has dipped back to 1767 after reaching 1787
on Tuesday.
The Premier designate in Italy has so far not been able to compose his final government. There are rumors that ex-commissioner Monti shall take responsibility also for the Ministry of Finance. Greece is expecting a confidence vote on its new
government to day. Facing new elections in the nearest days, Spanish bonds raise and are now close to facing the critical 7 % level.
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25.11.2011
EU-quarrel
sinks Asia
The Asian exchanges ended in red for the fourth consecutive day effected by Angela Merkel’s
resistance against issuance of EURO-bonds and, unwillingness to let ECB (European Central
Bank) be a lender of last resort.
At the German-France-Italian summit Merkel stressed that Eurobond establishment shall level out
national differences in the interest rates on bonds. An immediate result would be higher German
interest rates. Instead of letting ECB act as lender of last resort, Germany wants changes in the EU-treaty
which can force highly indebted national states to exercise budget discipline.
The continued internal quarrel in EU had a negative effect on Asian market. Europe is expected down for the
ninth day in row. Euro is at at a 8 week low. EURO/USD 1.3332, up from bottom levels on 1.33 in Asia
trading. Oil is flat; NYMEX 96,50 and Brent 107. Gold struggles at 1685 down 10 dollar since
start of morning trade. USD is strengthened against JPY at 77.32.
28.11.2011
Asia turns up
after red week
Asian stock exchanges were off for a good start of the week after rumors that IMF, the International Monetary Fund, seems prepared to give Italy an emergency credit on 700 Billion Euros. This created along with better sales during the American Thanksgiving at end of last week, a better market sentiment. Nikkei in Japan was up with 1,47 % and Hang Seng raised 2,02 %. The Euro is also strengthened. Euro/USD is up from Fridays lows, trading at 1.3306.
The possible IMF credit shall give the new Italian premier, Maro Monti, more time to refinance Italy’s huge debt. With increasing talk about a break up of the Euro, these news has injected some optimism in markets which have fallen up to ten consecutive days.
Oil prices and metals are up during morning’s trade in Asia. Gold trading at 1706 and up 30 dollars since Friday. NYMEX is at 98,40 and Brent 107,50. USD is considerably stronger against yen at 77,7643.
06.12.2011
S&P plays politics prior to EU-summit;
EURO countries
downgraded
On the eve of the EU summit Thursday and Friday the US rating agency Standard and Poor has created new panic in
the markets by downgrading all members of the EURO including Germany and France. Germany is loosing its triple
A rating and France is degraded to AA. All EURO-countries are set under immediate economic surveillance. The S&P
decision would put increased pressure on banks and bigger companies also threatened by downgrading.
The news came just hours after Sarkozy and Merkel in a joint press conference announced agreement on how to
tackle the Euro-zone crisis. France and Germany are proposing a revision of the European Treaty to be ratified by
member states by March 2012. A part of the package is introduction of stronger budget discipline whereby immediate
sanctions are going to be taken against member countries not following its obligations. Monthly EU- meetings at top level
is also included and a more effective mechanism for the rescue of troubled sovereign economies.
The package was well received by the market. Europe and the US rose till S&P spoiled the party in late US-trading. After
listing impressing gains over the last weeks the Asian exchanges are steeply down. Oil prices are falling as precious
metals. Gold is falling 40 dollar from inter day high on yesterday.
The downgrading has put the Euro under increased pressure. Euro/USD is 1.3377. Speculators are watching the
EURO drama, and it is expected that the EURO shall be under constant attacks for weeks and months to come.
Japanese Yen is strengthened and trading at 77,76 against the dollar.
07.12.2011
EURO remains firm
before key summit
EURO remained firm against the dollar (1.3426) in Wednesday’s morning trade in Asia as investors trimmed
their holding of positions considering whether to bet on a further decline in the common currency ahead of
crucial EU-summit on Thursday and Wednesday and European Central Bank (ECB) meeting on Thursday.
Market participants are closely watching any developments and new moves with eyes mainly on the
compromise package worked out between Merkel and Sarkozy indicating a rewriting of the European
Treaty. The rating agency Standard and Poor shocked markets yesterday with news that it intends to
downgrade all members of the EURO-zone.
While most concentration so far has been on Germany and France, Premier Cameron yesterday stated that
he shall veto any revision of the EU-treaty not in accordance with British interest. This tells
that the indicated Merkel/Sarkozy proposal by far is a foregone conclusion. Any transfer of power and
authority to Brussels shall most likely be met with fierce resistance from more nationalistic member
states.
Australian GDP grew 1,0 % from previous quarter and climbed 2,5 % from a year earlier. 0,8 was expected.
The better than expected figures supported risk sentiment and benefited higher yield currencies as the Euro.
A senior dealer at Barclays Bank in Tokyo claimed many investors seem to cover Euro/USD short positions
and that the ground appears to be firm in the 1,33 segment. In short term there is an upward bias versus
dollar. Euro/USD will likely continue to be volatile driven by any headlines prior to the EU-summit.
Oil prices have stabilized over the last 24 hours. Trend towards a stronger Yen continues; USD/JPY at 77,72.
Gold is trading at 1729 up from yesterday’s low at 1703.
08.12.2011
Short term EURO fate
hangs on the summit
The short term fate of the EURO rests to a considerable degree on the outcome of the highly anticipated end of the week meetings
in the European Central Bank (ECB) and the two days summit of European leaders Thursday and Friday.
There are strong rumors this morning that ECB shall cut it’s interest rate with at least 50 basic points from today’s
1.75 % level. This shall allow banks to pledge a wider range of collateral to borrow funds from the central bank and
to extend the duration of the long term lending facility to two or thee years.
These eventual measures might be seen as a prelude to the summit and as an effort to avoid a new global banking
crisis. Normally a cut in the interest rate is seen as negative to a currency, but this is not normal times. Markets
have factored a 25 bps cut. No action might therefore be seen as negative and lead to a steep fall in the Euro presently
trading at at 1.3407 versus USD.
In addition to ECB actions, Markets are expecting that the often fractious EU-group shall come up with a viable
program necessary to ensure progress in tackling the Euro-zone debt crisis. Merkel and Sarkozy seem to agree on
stricter budget discipline by transferring national sovereignty to Brussels.
The overriding challenge, however, remains to find a balance between harsh austerity measures and economic growth. Critics are
claiming that the proposals deal with the consequences and not the reasons for the crisis giving banks
closely connected with the political elites a free ride leaving the taxpayers once again to pay for their excesses.
Stock markets ended flat or in the negative zone yesterday. Futures are down as are markets in Asia. Oil prices striving to keep above the USD 100 level (NYMEX 100,55). Gold is stabile on 138.
Market update – 09.12.2011
England blocks
EU-treaty revision
After a marathon session running into the early morning hours England blocked Sarkozy-Merkel’s proposal for a new and revised EU-treaty giving the European Commission more decision power on the cost of member states.
Premier Cameron made it clear the proposed revisions did not give England the necessary guarantees and especially not for its financial services industry.
Cameron stressed that England is not a part of the Euro-zone, and he sees the inflexibility of the EURO as mainly responsible for the financial crisis. He offers England’s support, but obviously see the EURO-crisis as primarily a problem for continental Europe.
An intergovernmental agreement between the 17 EURO-members seem in this situation to be the most likely outcome. To avoid the impression that ECB (European Central Bank) is acting as a lender of last resort, 200 Billion Euros is going to be transferred to the International Monetary Fund (IMF) to create an extra firewall to bail out EURO-zone countries like Spain and Italy fighting with big budget deficits.
European leaders tried after the meeting to give this outcome towards a two-tier Europe a positive spin.
Markets have reacted cautiously. The steep falls in futures seen through the night seem to have stopped for now.
Euro/USD is flat at 1.3325 while YEN continues to be strengthened versus USD at 77,59.
Oil prices have fallen more than two dollars on the prospects of increased uncertainty and slower economic growth. Last quarter result for industrial output in China shows that the dramatic growth seen for many years have come to a halt.
Gold prices which reached 1750 inter day yesterday, have been in free fall at present trading at 1708.
Market update – 12.12.2011
Markets calm down:
Asia opens in blue
The Asian stock exchanges opened the week up on positive US macro numbers and some
optimism after last weeks EU summit. “The Michigan Consumer confidence” shows
growing consumer confidence to future development of US economy.
MSCI Asia Pacific Index is up 1,2 % with five shares up against one in red. In Japan is the
Nikkei up 1,2 %. Kospi in South Korea increases 1,48 %. The exception in Asia is Shanghai
Composites in China down 0,57 %.
The European Union summit which ended last Friday did not solve any fundamental
problems connected to the sovereign debt and looming bank crisis, but gave some
temporary relief which markets seem to have reacted positively to.
National budgets shall be subject to review by the EU Commission in an effort to
introduce stricter budgetary discipline. Membership countries which are not behaving
in accordance with strict rules might be subject to strict sanctions.
The British Prime Minister David Cameron rejected to support the final agreement
which might have opened for a revision of the EU-treaty. Any revision of the treaty
demands unanimous decisions. The proposed drafts are supported by the 17 Euro-members
and 9 of the other EU-members.
The EURO/USD is still under pressure this morning at 1.3356. USD/JPY is stabile at
77,62. Oil prices are stabile; NYMEX close to 99 and Brent trading in the interval
108 – 109. Gold prices are steeply down trading at 1691.
Market update - 13.12.2011
Global markets drop
on EURO concern
After a couple of days of digesting the result of end of last week’s EU summit meeting, global markets are back in deep red. Instead of the summit leading to a relief Christmas rally, dark skies are back on the horizon. The sovereign debt crisis, a strong need for recapitalization of major European banks, a looming recession and the future of the Euro are back on the top of the agenda.
The EURO continues to be under strong pressure and reached a 10-week low versus dollar at 1.3198. EURO is also loosing ground versus yen, JPY dipping to 102,60. The markets are expecting that S&P rating agency already this week is going to follow up it’s threat to downgrade all countries within the EURO-zone.
Eight Spanish banks were yesterday placed under review for a possible downgrade by another rating agency, Moody’s Investors Services, adding strongly to the question marks and uncertainties in the whole banking sector.
Support at the 1.3150 mark for Euro/USD is vital. A clear breach of the mark can technically open the Euros downside to 1.2860 reached in January 2011. As long as the European Central Bank gives up it’s reluctance to purchase more euro-zone sovereign debt, the Euro seemed in for further dips.
In many financial circles there are increased concern about the austerity course chosen by European leaders. Strict austerity measures can according to many economists only lead to a repetition of similar mistakes European leaders made between the two world wars leading to mass unemployment and economic recession.
Markets all over the world are strongly down along with deep plunges in the gold and precious metal prices. Gold trading at 1651 with analysts forecasting steeper falls.
Market update - 14.12.2011
EURO set to
dip further
The Euro was mostly flat in static Asian trading after tumbling over night to its lowest level in
nearly a year. EURO/USD at present trading at 1.3038. Traders see a further slide in the single
currency when no silver bullet is in sight for the Euro zone debt woes.
It seems to be only a question of time before the EURO falls through the 1.3000 mark and will
test the technical support level on 1.2860 seen in January 20011.
The negative EURO sentiment is likely to persist unless Germany and the European Central
Bank (ECB) step up their efforts to put an end to Eurozone crisis. Such changes are, however,
unlikely to occur within soon.
Under the present circumstances the EURO is expected to come under increased
pressure also from the yen. In October the Euro fell to a ten years low against the Yen at 100,77.
Japanese analysts predict that the EURO may fall as deep as to Yen 96. They predict Euro/USD
down to I,20; testing earlier low levels seen after the financial crisis in 2008.
Traders will today keep a sharp eye on the Italian bond auction and EU production data numbers
for October which shall be published as well.
Meanwhile stock markets are extremely volatile. Dow Jones went yesterday from plus 100 to minus 100
during the same session. Financials are under strong pressure.
MF Global’s chief executives could offer no reasonable explanation on where USD 1,2 Billion of client’s
money had disappeared. Possible major banks involvement were not conducive for a more positive sentiment.
OIL prices are still high (NYMEX 100 and Brent 109,75) waiting for outcome of OPEC meeting.
Gold and precious metals have retrieved somewhat after last days steep falls. Gold at 1638
up from yesterday’s bottom on 1622.