Daily Reviews of major currencies from Globe Gain Forex Rebates - page 8
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23/05/2012 Good news for USD: the housing market in the USA looks better and better
EUR/USD
The former Prime Minister of Greece, Lucas Papademos, said that the country is hardly likely to exit the euro zone, though mentioned that the risk still remains. As we predicted, the recovery of the single currency has proved to be weak and short-term. Already yesterday the euro/dollar was falling without any serious news background involved. Sales grew only at the end of the day. Yet, it is of interest that the American exchanges closed the day at the opening levels, having made an attempt to grow prior to that. We again see that the markets don’t act in unison. Such a picture is usually observed when the market participants are focused on the technical side of trading and rebalance their portfolios. We’ve already mentioned that EUR/USD cannot break below 1.2640 straight off. However, after a certain consolidation, the chances that the pair will manage to do that will grow, should the events unfold in the negative way. Besides, the dollar will be in greater demand if America posts more improvements on concerns about the European integrity. The American bulls received a good reason to act yesterday on the release of the US Existing Home Sales data. The sales rate grew by 3.4% in April, which is within a slightly upward trend that we indicated after the reports on the housing starts. Another positive factor is that the median home price has grown right by $12.6K, up to $177.4K. We should also say that the stock of unsold homes has increased, nevertheless these fluctuations are within the normal limits and stay far from those extreme levels which were observed during the crisis and even a year ago. Tonight our optimism concerning the US housing market can be proved or disproved by the New Home Sales data. Investors forecast growth. It’s also expected that the House Price Index from FHFA will demonstrate positive dynamics as well. At the same time analysts feel more and more skeptical about the chances of the European leaders to come to an agreement in Brussels today.
GBP/USD
Yesterday’s news from Britain turned out to be quite favourable for those who are concerned about the country’s economy. The British government managed to achieve the budget surplus in April. The net debt repayment made £18.8bln...Read full review
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24/05/2012 Due south
EUR/USD
It didn’t take much time for the market participants to rebalance their positions, and yesterday the common currency was again pushed down to new local lows. This time it was much easier to break through the defence line, once really strong at 1.2620. Last week the attempt was foiled just like in January 2012 and at the end of August 2010. The talks of the EU politicians about the development of the Greek exit plan tipped the scale. Earlier from February till the end of April the consolidation was mainly held within the corridor above 1.30 and below 1.34. Something like that was happening in 2011, when from April till August the euro/dollar was fluctuating within a relatively steady channel. Only a keen eye may notice that now as well as then the pair is mainly controlled by the bears, posting lower highs and lower lows time after time. Breaking through the support level (when the bulls finally gave in at 1.40) sent the pair down to 1.31. Only then the sales stopped for a while. We’ll probably see something like that this time as well. The single currency is moving stepwise from 1.40 to 1.30. So the next stop is now expected only at 1.20. If it is caused by mere concerns about Greece’s disintegration and Greece itself remains in the euro bloc, many periphery markets will get a chance to enhance their competitiveness, which is so much dreamt of. Of course, the healthy manufacture of Germany and large investments into this country on the capital outflow from other states will play right in the hand of the German locomotive. We’ve described a rather smooth run of events. But the anticipation of a tougher turn is weighing more and more heavily on the market participants. It is feared that at the elections in June Greece will select the secession from the euro zone and again adopt the drachma. It’s not clear yet how the country’s debts will be converted then. But what really alarms is the growing accord among the EU leaders. Cameron has nothing against Greece’s exit and, as rumoured, Merkel is also ready to put up with it.
GBP/USD
The sterling is even more technical than the euro. Having fallen out of the channel, it was accelerating for three days in a row. Then for a while it consolidated at the 200-day moving average level, to which the pair has frequently stuck this spring... Read full review
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25/05/2012 While Europe is living a nightmare, America … doesn’t care
EUR/USD
Interesting enough, when America’s affairs are in a dreadful state, the whole world prays for mercy, but when the whole world goes to pieces, the States doesn’t seem to care at all. The American S&P hasn’t managed to perform any impressive bounce since the middle of the week, but still keeps edging up steadily. Meanwhile, Asian stocks are posting 5-week lows and the single currency doesn’t have enough strength to recover from the sales yet. For three consecutive days certain stabilization in active European trading has been followed by the euro sales at the end of the American session. Leaving aside the sharp drop on triggering stop orders yesterday, this dynamics can be easily explained. The euro is quite steady in Europe, as the European investors are simply shifting money from one country to another, without changing the currency. At the same time, American investors prefer to hedge their external risks, buying the stocks of the US companies and selling the euro and Asian assets. It’s of interest that the news from Europe should have a short-term impact only. Yesterday‘s PMI data came in very poor, showing a sharp decline in the German manufacturing activity (for the third consecutive month). The Business Climate figure also tumbled down from 109.9 to 106.9, which is the lowest level since last October. Such bounces are not typical of this indicator, in fact. The Current Assessment sub-index sank down to its lowest rates since July 2010. Need we say that the whole euro zone feels worse now? While the German Flash Services PMI stays afloat, demonstrating the same rate of growth as a month ago (the figure is 52.2), the similar indicator for the euro area has declined from 46.9 to 46.5, which is really low. The Flash PMI Composite is now at 45.9 against 46.7 a month ago. For now the signs of slowdown in the USA are little: Durable Goods Orders increased by 0.2% in April, while the Core Orders shrank by 0.6% against the expected 1.1% growth. Yet, it is just a leading indicator, so the growth won’t necessarily stop. Apparently, the economic slowdown is built in the rates of stocks, which have significantly depreciated since the beginning of March.
GBP/USD
Britain is suffering a recession, but yet the sterling can hardly be called a whipping boy. The revised GDP figure for 1Q has proved to be even worse than the preliminary one. When the first estimate came in, many said that the 0.2% decline might be revised up... Read full review
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28/05/2012 Buying on dips?
EUR/USD
They say that the most successful deals to buy stocks are made when the markets are quaking with fear and the forecasts differ only in the shades of black. Last week it seemed that the American stock exchange was involved in that very buying on the dips. But it should be mentioned that at the same time the euro and high-beta currencies hit new local lows. Against our expectations, speculators decided to make the most of the decline last week, thus triggering further sales on Friday. The euro sank close to 1.25. The markets first spread the rumour that Greece would use the coming long weekend to announce their exit from the euro bloc. However, by day’s end the attention had shifted to Spain, whose autonomous region Catalonia was said to be on the verge of bankruptcy. If true, the country’s debt situation would be much aggravated. However, nothing of the kind happened during the weekend, so the single currency breathed a sigh of relief, having jumped from the Friday level of 1.25 up to the 1.2590 level at early trading on Monday. This is close to the highs of the preceding session. So, no bad news is good news again. Let’s turn back to the US stock market despite the fact that there won’t be any trading today. Judging by the charts, the market participants are actively buying assets on the dips now. The charts show the birth of a bounce, which can well affect the course of trading today. With such a mood the euro can try to break above 1.2630/50. However, be careful when opening long-term positions. In our opinion, the current recovery attempt is nothing more than a bounce with a chance to turn into consolidation. The government supported Spanish Bankia asks for the €19bln bailout and plans to get it from the ECB, using government bonds as collateral. It looks as though the ECB was now involved not only in bailing out sovereign states, but also in saving the banking sector. If the Bank doesn’t mind it, it will be a new stage of integration as the CBs of Japan, Britain and the USA have already taken an active part in saving their banking sectors from collapse.
GBP/USD
As there is no important domestic news, the British pound has to follow the major market sentiments and movements. Thus, coming after the euro it is now consolidating a bit below 1.57... Read full review
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29/05/2012 EUR skips the short-covering rally, for the time being
EUR/USD
The correction bounce of the euro couldn’t last for long on Monday. Already by the end of the day the pair sank to its 2-year lows and closed out the day around 1.2530, where it keeps trading today. Meanwhile the markets are showing a slight increase. However, the current trend has hardly been triggered by growth in risk demand. Apparently, various funds are involved in rebalancing of their portfolios, collecting cheap stocks in accord with their trading strategies. That’s why the current bounce in the markets isn’t very helpful for the euro. The ongoing concerns around Greece and the Spanish banking sector put heavy pressure on the government bonds of these countries. The yield of 10yr bonds has already amounted to 6.5%. Remember that already the yield of 7% is considered to be unstable and can urge the country to beg the troika (EU/Fed/ECB) for a helping hand. Yet it should be mentioned that last year the yield of the Spanish bonds already reached that mark, then the collapse of the financial system was averted thanks to the interference of the ECB. This time the situation seems to be tenser. Again the markets see that Greece is not the only country which feels difficulty in observing tough austerity measures. Spain is also unable to meet the challenge. Despite the strenuous efforts of the central government, the regions cannot handle their deficits and the banks are in a dire need for the inflow of fresh capitals to liquidate the toxic debts. Yet we shouldn’t forget that since the beginning of summer the banks will have to meet new, tougher capital requirements. In that rule, however, there has been a reservation relating to the case of a sharp deterioration of the financial conditions. Can they be worse than now? As the spread between the yields of the ‘trustworthy’ countries and the Latin bloc is growing, Europe can do nothing but speed up the creation of euro bonds. The leaders have to reach a compromise as soon as possible.
GBP/USD
The dynamics of GBP/USD clearly shows how quiet the market keeps in wait for the further development of events. The bounce off the lows, the sterling performed on Monday has been fully recouped by today. The short-covering rally couldn’t gain momentum at thin trading... Read full review
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30/05/2012 American stocks up, EUR down
EUR/USD
The ongoing concerns around Spain impede an upward bounce in the euro. Yesterday EUR/USD hit a 2yr low, breaking through 1.25 and reaching the level of 1.2457 at some point. Portugal and Spain are still suffering the capital outflow. The yield spread between these countries’ 10yr bonds and German Bunds exceeds 1000bp for Portugal and 500bp for Spain. The German stocks cost more than their American counterparts (i.e. their yield is lower). This current state of affairs should hardly be attributed to investors’ confidence in the higher growth in Germany against the USA, but can be rather explained by the fact that the funds tend to withdraw their assets from the troubled countries, yet keeping them in the euro. It takes time to convert money into another currency, you know. Moreover, the euro is obviously oversold, so apparently the players will want to wait for a while to sell the euro on the bounce. Our supposition is also based on the fact that the American stock indexes keep appreciating. The drop of the euro and growth of the American stocks clearly show that the capitals deliberately flow to America which can supply much more assets of the proper quality. However, we should understand that the abnormally low yield of the German Bunds is connected with a huge volume of liquidity, which is now just waiting for its turn to quit the euro-zone. The German debt market, even when joined by the corresponding markets in the Netherlands and Scandinavian countries, simply doesn’t have such a great number of high-quality assets to satisfy the existing investor demand. Under such circumstances the market of joint Eurobonds would be of help, creating additional supply of reliable assets. However, on the other hand this idea entails subprime CDO. The world has paid a stiff price to learn this lesson. Probably, there is some sense in creating a kind of “subprime Eurobonds” which would generate money for weak European countries and have a corresponding medium rating. Their yield will be higher than that of the EU-wide bonds, but lower than the current yield of Greek, Spanish and Portuguese bonds taken separately. Besides, the yield of such bonds would be less volatile.
GBP/USD
The troubles of the euro don’t let the sterling grow or even consolidate at the same level. It can be explained not only by the correlation of the European currencies against the dollar or yen, but also by the fact that the Spanish banking sector issues put a heavy burden on Britain... Read full review
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31/05/2012 Hope dwindles
EUR/USD
As seen from yesterday’s rates, hopes that Spain would do without help of the EU were gradually melting away throughout the day. The pair neither bounced on bad news nor flew on an avalanche of triggering stop-orders. However, having started the day from 1.25, the euro/dollar closed it at 1.2370. Again it becomes evident that the single currency suffers the heaviest pressure at trading in America, while sessions in Asia and Europe go on by far more quietly. Yet, even then we don’t observe any significant corrections in the pair. The weak Italian auction with a low bid-to-cover ratio of 1.4 looks particularly prominent against the poor news background. The yield of the Italian 10yr bonds has grown up to 6.03% against 5.66% earlier this month. Their Spanish counterparts have even a higher yield of 6.66%. Both consumer and business confidence indicators keep falling, despite the fact that they’ve already been showing negative figures for several months in a row. There is a feeling that Mr. Draghi was wrong saying that the ‘moderate recession’ in the euro zone proved to be less hard than expected. The reality prompts that the decline in 4Q last year and stagnation in 1Q this year can be followed by a very undesirable run of events in the third and fourth quarters. The journalists now seem to have turned all their eyes from Greece to Spain, whose EU membership is up in the air at present. Our hopes that the euro would make a stop at 1.25 vanished yesterday. Apparently, even if the pair performs a correction bounce this week, it will prove to be rather insignificant in comparison with the drop, preceding to it. For the first two weeks of May we kept talking that the down trend in the euro, which over the last three years has become a common thing at this time of the year, has turned out to be half as strong as before. However, in 2011 the pair performed a correction bounce in the second half of the month, and as you know this time we’ve seen nothing of the kind. The current situation looks more like that in 2010 when the reversal took place in June below 1.28. Now hopes for June are great, as the middle of it will be marked with elections in Greece and its end – with the EU summit.
GBP/USD
Yesterday the pound-bulls finally lost their nerve. Considering the influence produced on the sterling, the bad news from Europe can be divided into two categories. For a while the negative sentiments in Europe were accompanied by purchases of the sterling, as investors sought refuge for their money and the market of high-quality assets, denominated in the euro, significantly shrank... Read full review
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01/06/2012 EUR is heading for the lower depths, but who will have the courage to buy it?
EUR/USD
The ECB calls for politicians to develop a new investment guarantee mechanism at the EU-wide level in order to eliminate an adverse effect, which capital shifts within the region are now producing on some banks. In their turn, the politicians keep emphasizing that the ECB has to take a more active part in bailing out of the troubled countries. While chief officials are shifting responsibility on each other and dictating others what to do, the EU countries keep falling on the domino principle, and the single currency is hitting new lows against the dollar and yen. Yesterday there was an attempt to cover massive shorts, which eventually pulled the euro up. At trading in Europe the pair grew up to 1.2427. However, just as it was in the preceding days the American session brought with it a wave of sales in the euro, which drove the pair down to its daily low of 1.2336. At early trading in Asia the pair hit a new low, 1.2323. We can’t say when this trend will come to its end, as, though the decline two years ago was similar to the current one both in the scale and rate levels, the politicians at least formally rejected the possibility of the EU disintegration. Technically the euro is severely oversold, but it’s hard to find enough optimists which could produce any significant impact on the situation, reversing the trend. There is a feeling that speculators will try to push the pair below 1.20 next week. As seen from yesterday’s trading, poor news from the USA again boosted demand for the dollar. The ADP’s labour market data marked a growth of the US non-farm employment -133K against 113K a month before. The indicator was expected to grow by 145K, and at the beginning of the year the monthly increase made about 200K. The second quarter again proves to be much weaker, which can generate a need for new incentives from the Fed. Buying the dollar on poor figures from the USA, the market clearly shows that it is going through a crisis. The flight to the high-quality US corporate assets has led to the exit into the country’s liquid and deep treasury market. It just remains to see how poor the payrolls will be.
GBP/USD
There isn’t much news from Britain, but nevertheless it doesn’t hamper the dynamics of the currency. The sterling is falling against the dollar much faster than the euro, which is clearly seen in the second attempt of EUR/GBP to tear off the 0.8 level... Read full review
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04/06/2012 Poor payrolls revive Fed’s idea of QE
EUR/USD
Since payroll figures proved to be poor, the likelihood of further QE has significantly grown. The US non-farm employment has gone up by 69K. As has already been mentioned, the decline in economic and employment growth is quite typical of summer months. In this connection, many economists expected that May would be a weak month, forecasting the employment growth at 150K against the average half-yearly figure of 200K. However, the reality turned out to be even harder than this. The actual figures for May-June have shown employment growth just at 69K. Meanwhile, the data for April have been revised down to 77K against the initial estimate of 115K. What is important, the average workweek has shrunk from 34,5hr to 34.4hr. At first sight, the minimal decline has reflected a serious issue. The total time worked out in May has proved to be less than in April. The dynamics of labour remuneration are also of interest. The wage increases are lagging behind inflation and keep slowing down. The annual average hourly earnings have made 1.7%. The most recent available data on inflation for April have shown a 2.3% growth. Of course, it is better than 2.9% that we saw two months ago and than 3.9% in last September. Still, the decline in real earnings will continue to produce an adverse effect on spending. Thus, already now we can see a drop in the savings ratio, which can hardly be attributed to the disposition of Americans to live on credit. They simply need more money to satisfy their daily needs. In other words, America could need a new injection of incentives to escape another slowdown. That explains why the euro after a short fight still has started growing, and the price of Gold has skyrocketed from the preceding low of 1540 to 1630 just over a few hours. The single currency, which over the first few minutes was pushed down to 1.23, closed out the day above 1.24. It may eventually give rise to the short-covering rally in the euro, provided there aren’t any unpleasant surprises from Europe.
GBP/USD
Not all the currencies have displayed an equally positive reaction to the troubles of the dollar. The sterling proved to be among those which failed to close the day positive, despite the growth of the pair on the release of the US employment data... Read full review
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05/06/2012 May the correction start!
EUR/USD
The single currency is appreciating this morning. The correction of extreme oversoldness in the single currency is running its course. EUR/USD has gone above 1.25 at trading in Asia. This long-awaited correction is contributed by a neutral news background. It was a quiet day yesterday and the markets closed it out flat. Today’s correction can be explained by the expectations that the phone conference of G7 financial ministers scheduled for today will lead to some positive shifts towards resolving of the EU crisis. As G7 mainly consists of the countries which handle the slowdown by means of spending increase, Germany will turn out to be in the minority. As opposed to EU summits where Germany is the country with the largest economy, here its adherence to austerity will hardly meet any sympathy. Probably, Germany will announce its readiness to sacrifice the short-term drive for balance for the sake of a higher potential in the long term. There are certain grounds for that as Europe is now travelling the path of greater integration, which earlier was actively advocated by Germany. However, now it is not the only reason. Apart from the perspective to set more ordered budget rules, the markets need to be sure that the banking sectors of the troubled countries will get support from rich states, which in fact can be rather problematic. As usual, Europeans are very ingenious when it comes to long-term rules and plans, at all cost trying to put off the moment when they will have to part with their money. Yet the essence of the matter is not only in the greed of rich countries, but also in the fact that these countries’ electorates regard the Greek bailout as their personal loss and a too generous present, forgetting about ‘penalty’ interest rates imposed on Greece in accord with these rules. So, on the one hand the markets are pinning high hopes on the G7 leaders, but on the other hand demand immediate measures from the weak countries. A couple of weeks ago Spain carried out cash infusions into their banking system and yesterday it became known that Portugal is also infusing €6.6bln into its largest banks. Remember, the banks need cash infusions to meet the new budget requirements from EBA by the end of this month.
GBP/USD
The sterling is gradually catching up with the euro. Earlier today it was trading close to 1.54. However, we shouldn’t expect any sharp movements in the pound today as Britain is still on holidays, celebrating the Queen’s Brilliant Jubilee... Read full review
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