Daily Reviews of major currencies from Globe Gain Forex Rebates - page 7
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08/05/2012 No news is good news
EUR/USD
Monday’s trading was mainly quiet. After the drop, caused by the results of French and Greek elections, the single currency managed to recover from 1.2955 to 1.3065. But still technically the morning gap remained uncovered. To do that EUR/USD needs to rise up to 1.3080. The old saying - ‘no news is good news’ – is evermore true now. Yesterday that stance helped the euro to grow and it may do it today as well. Frankly speaking, this statement is only partially true: there was some news coming, but it was not of great importance. Thus, the German Factory Orders came in a bit beyond expectations (+2.2% against +0.5%). Still in the annual terms this indicator remains negative, showing a 1.3% decline. However, the favourable effect of this news was nullified by the Sentix Investor Confidence data. This index fell below the bottom of its December figure and proved to be at the lowest level since July 2009, when Europe was already coming out of the recession. Once again the sentiment indices point to that period, the hardest and gloomiest in the history of Modern Europe. The USA, on the contrary, enjoyed a surge in the consumer credit sector in March: 21.4bln against 9.3bln a month before. Of course, it doesn’t necessarily imply the beginning of the steady growth of the indicator. The surges of the kind have already occurred before and can indicate not only the stronger confidence in the future, but also the need of Americans for credits to pay their bills. The salaries are growing slower than inflation, and the interest rates are low in accord with the historical standards. By the way, the above-mentioned news hasn’t received any significant feedback from the markets.
GBP/USD
The British pound felt a bit better than the euro yesterday. It’s quite natural as it is not Britain which suffers the political uncertainty now.... Read full review
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09/05/2012 Greece again provokes risk aversion
EUR/USD
Yesterday we mentioned that the best variant for Europe is the absence of news. However, that situation couldn’t last for long. The political uncertainty in Greece again revived market agitation. The Greek Left Coalition leader declared that the bailout terms set by the EU and IMF should be nullified. For now these statements haven’t taken the form of laws yet and probably will never take it. But the European leaders will now think twice before issuing of another aid tranche to Greece. The country quite easily managed to disclaim the private debt obligations. That happened with the help of the EU leaders. So now they won’t find it easy to withdraw from further performance of their obligations. Most likely, the leaders of the Greek parties don’t realize all the political and economic risks of such statements. Besides, there was another unpleasant rumour stirring the markets yesterday. One of the Spanish magazines messaged that the government is going to nationalize the largest banking group in the country, Bankia. To better understand the scale of the problem note that Bankia’s assets make 1/3 of all the country’s economy and the government a few days earlier announced the plans to issue special debt securities meant to support the suffering regions. Spain is burdened with too many obligations. Will Rajoy bear that heavy load? It’s quite natural that under such circumstances the single currency should be under pressure – it again has fallen down to 1.2960. The euro would be much lower if there weren’t so many short positions, opened earlier. But the market concerns are observed clearly in other instruments, which are rewriting their months-long lows.
GBP/USD
Despite a certain slackening in the recent few days, the British pound is still rather expensive. It is at the 1.6150 level now, which is 3 points higher than the average annual figure (200-day moving average)... Read full review
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10/05/2012 EUR rewrites the four-month low
EUR/USD
The Spanish government has received the 45% share in Bankia, the third largest banking group in the country. 4.47 bln of the governmental aid will be converted into equities, thus allowing the group to build up its capital and confirm its solvency. The talks concerning the necessity of this step put pressure on the stock exchanges on Wednesday and also contributed to the euro sales. Even the rhetoric of Weidmann, president of Deutsche Bundesbank, hasn’t helped the euro. Weidmann keeps persisting in his opinion that the current measures, proposed by the ECB, are temporary and that the Bank shouldn’t be required to take any further steps to maintain the stability. Yesterday the single currency rewrote the four-month low, having fallen down to 1.2910. And today the pair hasn’t found any sound reason to bounce up yet and is trading around 1.2950. Technically it looks as though the common currency had broken through the bottom, which it was bouncing off for the preceding three months. The situation similar to this happened a bit earlier to the Aussie and there the breakdown proved to be real. With the single currency it’s a bit different as there are more factors to consider, so there are still those who believe that the current breakdown is false and that the pair has the potential to grow. It is quite possible, especially if we take into account the fact that over the recent three days the March statistics for Germany have come in beyond expectations. On Monday it was the release of Factory Order data (+2,2% m/m), on Tuesday – of Industrial Production figures(+2,8% m/m) and on Wednesday – of Trade Balance statistics (13,7bln), which proved to be higher-than-expected against the growth of both imports and exports. Euro-bulls feel more and more confident that, having shown fairly good growth in 1Q, Germany will evade falling into recession and will even manage to pull up some other countries in the region in the coming months.
GBP/USD
This day is very important for the sterling as the Bank of England will announce its decision concerning the interest rate and asset purchase programme. Most market participants suppose that the Bank will take a break and won’t extend its QE programme...Read full review
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11/05/2012 Keeping our fingers crossed for Greece
EUR/USD
‘Hedging failed’ – that’s the way Jamie Dimon, JPMorgan CEO, has described the trading loss of $2bln. In fact, the losses will hardly end there and in this quarter there will be further losses resulting from market volatility. Some especially meticulous analysts suppose that the company will possibly lose another $3bln. It’s a hard blow for the reputation of the company and its managers. Such unexpectedly bad news not only put pressure on the stocks at the end of the American session, but also can become an eventful moment in the fight of investors against Walker’s rule. All this may or may not have far-reaching consequences. However, the fact is that the single currency has again rewritten another local low. To be honest, for the three consecutive years the beginning of May has been associated with the massive euro sales. But even despite the drop the single currency looks more confident than in 2010 and 2011. Those years the difference between the max and min levels made 10 points in the first two weeks of May. This time the euro has sunk only by 4 points. Well, not bad for the barely alive euro. This week the markets are to plunge into the disturbing time of teetering on the brink, when decisions concerning Greece may be taken just a few hours before the deadline. Today is the last day when the Greek parties will try to form the coalition. If there is no coalition formed, the president of the Republic will have to announce the rerun of elections.
GBP/USD
Yesterday we proved to be wrong in regard to the BOE’s actions. The Bank preferred to do nothing, keeping the size of the QE programme at the level of £325bln...Read full review
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14/05/2012 EUR plunged below 1.29. Politicians consider the losses the Greek secession may inflict
EUR/USD
The single currency opened the day with a drop below 1.29, caused by the persisting political uncertainty in Greece. Apart from the Bloomberg’s survey which forecasts the more than 50 % probability that “at least one country will leave EU by the end of the year”, some European officials already say that the consequences of this step are discussed at the summit level. As many times before, the deadline for the political decisions on Greece has been passed with no certain decision taken. The country still doesn’t have the government. The ECB’s Honohan said that “technically” Greece can disintegrate the euro, but it may damage the currency. Germany’s Finance Minister Schäuble pointed out that none of those who demands austerity from Greece cannot make the country stay. The European Finance Ministers will meet today to discuss the fate of further tranches to Greece and the situation in Spain. We believe that the worst point of Greece’s quitting is that it will severely damage the confidence in the banks and companies in other troubled countries like Spain and Portugal. Perhaps, even Italy will be affected. If officials are really weighing up the probable exit of one of the countries, they should, for a start, think over and agree on the mechanisms to assure the markets that this is really ‘an exceptional case’. As you remember, the attempt to make the markets believe that the Greek debt restructuring was this very exceptional case proved to be vain.
GBP/USD
The British pound has been gradually declining for two days. The level of 1.6180 became the starting point of sales in the currency after the upsurge on Thursday. The sterling has reached the strong support level of 1.6060 and is trying to break lower...Read full review
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15/05/2012 Markets paint the countries black and white, without any shades of grey
EUR/USD
Obama decided to seize the chance and surf the wave of people’s wrath with large banks. The US President pointed out that the JPMorgan loss would lead to tougher regulation of financial institutions. This is just what we feared when spoke about the $2bln loss of businesses (further it may even amount to 3bln). Such perspectives are favoured neither by investors nor by companies. As a rule, at these important points, when the fate of such bills hangs in the balance, the markets go down. Since the USA is heading for presidential elections, Obama will try to play his card as well as possible. It’s hardly good news for the markets. The regulation issue may appear on the agenda in a couple of months. However, at present the markets also have something to worry about. Stock exchanges remain under pressure of risk asset sales. For all that the single currency looks surprisingly steady against other high beta currencies. Thus, though EUR/USD edged close to 1.28 earlier today, EUR/AUD has been gradually growing since the beginning of the month. The thing is that the European debt markets still see everything black and white, without any shades of grey. The countries, where politicians declare their intention to reject the austerity, are severely punished by the markets. The spreads of French, Spanish and Greek bonds are growing against Bunds, the yield of which hits record lows. Earlier medium-term bonds served as a good indicator of inflationary sentiments, but now they do not. The yield of German 5-year bonds makes 0.5% at present, despite the fact that some of the country’s officials have already claimed their readiness to be more tolerant towards the inflationary pressure, allowing for a bit faster price growth.
GBP/USD
The British pound survived Monday with credit, having managed to hold the important level of 1.6060. The pound was at that point when the single currency was rewriting its 4-month lows against the dollar. And when the euro stabilized the sterling became much in demand...Read full review
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16/05/2012 Escape velocity
EUR/USD
«Greece is close to the end of the road” said Swedish Finance Minister yesterday, referring to the country’s membership in the euro-zone. Two and a half years ago, when the analogy with the road was drawn, it was emphasized that it was the beginning of a long and hard journey towards financial stabilization. Apparently, Greece has successfully finished the journey, but in the wrong direction. Yesterday it became absolutely clear that the country will not manage to form a coalition government, so reelections will be held in a month. This news, coming prior to the active American session, hit the single currency and afterwards affected other risk-sensitive assets. It should be mentioned here that this is not the case when reaction lasts for a short period of time and then is followed by purchases of cheaper assets. The euro makes stops from time to time, but then again falls under selling pressure. Now EUR/USD is at 1.2730, which is a point lower than the daily opening price and a point higher than the lows of January 2011 and August 2010. S&P struggled not to fall lower at the start of trading, but eventually dropped to close out the day. Except for almost inconspicuous corrections on May 7 and 10, the Americans stocks depreciated each day this month. To be fair, however, it should be noted that the current market reaction is more restrained than a year ago. Those looking for good news may find it in yesterday’s euro-zone preliminary GDP statistics, which proved to surpass the expectations. The economy didn’t sink, but showed the zero growth against the levels of the preceding quarter and also of the same quarter a year ago. That happened due to 0.5%, by which the German economy went up. It’s an unexpectedly strong growth, especially when compared to the forecasted level of 0.1%. The newly-elected French President Hollande yesterday arrived in Germany to meet Merkel. Eventually they said that they had managed to come to terms with each other. It’s not clear yet what language prevailed in their discourse, French or German, but the talks about ‘fleeing to safety’ are becoming more and more wide-spread.
GBP/USD
The British Trade Balance once again brought to the surface the hardships of the country’s manufacturers. The Visible Trade Balance remained roughly at the same level as a month ago, having shown the £8.6bln excess of imports over exports... Read full review
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17/05/2012 Markets are sick and tired of falling and make feeble attempts of correction
EUR/USD
Yesterday the markets rewrote their local lows on growing concerns around Greece. EUR/USD sank as low as 1.2680, but by now has slightly bounced up to 1.2745. We cannot say that the situation has changed much for the better, so the current movement should be regarded as nothing more than a mere correction after a rather large anti-rally. Since the beginning of May the pair has dropped by 6 points from the 1.3260 level. As has already been mentioned, this year’s movement resembles those of the previous two years, however this time the decline is half as strong as before. The reason for that is not only the fact that the poor news from Greece has been a real cause for concern over the last three years, but also that money, flowing out of the troubled European countries, goes into the bonds of more fortunate states of the same Euro-Zone. Literally, it seems to be a simple transfer of money from one pocket into another. The mischief of this is that these pockets belong to different parties. Since there is no tight fiscal unity (and there’s not many who want it now), the current situation with weak and strong EU countries cannot be compared to the way money is distributed between rich and subsidized regions in one particular country. However, inside Europe there exist very close ties, that is why the periphery’s issues tell badly on the business sentiment of the core countries. In long term it adversely affects the region’s potential, putting off the time when the economy will be finally able to afford the normalization of interest rates. Standing in contrast to all that, the USA keeps carving its way upwards. The housing market is moving with more than a measured tread, but this is not a decline already, but a steady organic growth, absolutely different from that boom period. In April the Housing Starts grew up to the annual rate of 717K. A year ago the figure was 552K. The graph clearly shows that the market is still in the uptrend. It’s also surprising that physical capacity should be utilized that much. Yesterday’s data on industrial production have recorded the capacity utilization at the level of 79.2%. In the boom years that indicator was a bit above 80% and in the depths of decline went down to 66.8%. The industrial sector has recouped 80% of the losses incurred during the crisis. In this regard, the USA has a more strained situation with the inflationary pressure. However, in the released FOMC meeting minutes it is clearly seen that the Fed has preferred to focus on the possible risks on the side of the euro-zone. That’s true, we are more concerned about the things which are unamenable to our control.
GBP/USD
The idea that we worry most about the things which are out of our control was also confirmed by the BOE King’s speech yesterday. Rendering another quarterly inflation report, King also said that the consequences of the EU disintegration are unpredictable...Read full review
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18/05/2012 Rating agencies are again armed with knives
EUR/USD
Yesterday morning the markets were trying to change the situation with the oversold risky assets. However they failed. EUR/USD was actively sold at the 1.2745 level on the rumours that investors had withdrawn over a billion out of the suffering Spanish banking network. Now the markets closer than usually watch the situation with deposits as the sharp investment outflow can knock down any bank. Leaving aside the fact that exactly the capital withdrawal is frequently called a trigger of the Great Depression, let’s remember the year of 2007 and insolvency of the British Northern Rock. Further, let’s recall the story with Lehman which was seriously affected by overagression of investors, who altogether rushed to withdraw their assets. Going back to the present, two days ago it was bruited that over Monday on the futile attempt to form a coalition government the Greek banks had to give about €800bln back to their investors – this rumour was then refuted by officials. Now, from hearsay, over the first two days the withdrawn volume has amounted to over 1bln. And during the whole period of crisis the banking deposits have shrunk approximately by a third. Yesterday it also became known that Moody’s cut down the ratings of 16 Spanish banks, including the largest Santander and Bilbao Vizcaya Argentaria. This downgrade quite naturally followed the cut of the Spanish government rating. On Monday 26 Italian banks suffered a downgrade. The talks about the probable exit of Greece reached another agency. Fitch again revised down the rating of Greece to CCC, though it was raised just in March. Apparently, the agency will keep working with its sharp virtual knife in the future. They say that in Ancient China there was a torture called “death by a thousand cuts”… Taking into account such external conditions, the euro looks quite confident versus other currencies. Though day after day it’s been hitting new local lows against the dollar. And already today the daily minimum makes 1.2641 against 1.2660 that we saw yesterday. From day to day the intraday high has been declining, each day coming lower than a day before. To make sure that the similar dynamics is seen from a broader perspective as well, let’s consider the dynamics of the last 4 years. The peaks of the major trends have been as follows: 1.6037 in 2008, 1.5144 in 2009 and 1.4939 in 2011. The greatest lows, which were starting points of euro sales, were reported only twice: 1.2328 in 2008 and 1.1876 in 2010. If this dynamics persists further, the next low may be found below 1.17. There is a high probability of this even if Greece doesn’t quit the euro bloc. There are too many problems besides this small country.
GBP/USD
The top British officials to the full employ their means to impact the national currency rate in order to enhance the competitiveness of the domestic economy. On Thursday Premier Cameron stated that the BoE can and must do more to support the economy...Read full review
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22/05/2012 Chinese incentives are to benefit EUR
EUR/USD
On Monday the markets managed to extend correction. The most reassuring thing is that the correction was performed simultaneously in different markets. In the previous review we mentioned that the growth of the euro against the background of the falling stock markets is nothing but a mere technical bounce. However, yesterday the demand for risky assets was supported in the stock markets as well. The American exchanges posted the largest growth in two months, speculating on the expectations that China is heading for a new wave of incentives. It looks as though the politicians of the Celestial Empire were afraid themselves that they stepped too hard on the brake and that the economy is now running the risk of hard landing. To confirm it, let’s turn to the Conference Board’s Coincident Index published overnight. It is the second time the index is on the decline over the last 4 months. And if in January the decrease could be regarded as a consequence of the public holidays in the country, April’s decline of 0.8% makes us ponder over the hardships the economy might suffer under the current financial conditions. The balancing Chinese officials are to carry out won’t be easy, as at the same time they will have to restrain property speculations. The Chinese affairs have a significant impact on the attitude to risk and, as has been repeatedly noticed, the stronger growth in Asia supports the euro. Of course, traders need to glance back at the state of affairs in the region itself. However, for now there is nothing of interest there, except for the French support of the idea of common bonds. This news is potentially favourable, but we all know how easily this potential disperses behind closed doors of numerous EU summits. EUR/USD has settled around 1.28, being too weak to go lower because of a record number of speculative short positions in the pair. Under such circumstances the market has no chance to go down, so the support at 1.2620 can remain intact over another couple of weeks.
GBP/USD
This day doesn’t promise to be easy for Britain. As we mentioned yesterday, today the markets will pay their attention to the publication of borrowing volumes in the public sector. Thus, the markets will be able to check how well the British exchequer is filled and how close Cameron is to keeping his pledges...Read full review
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