FOREX - Trends, Forecasts and Implications (Episode 5: July 2011) - page 209

 

EU summit: a blueprint for resolving the crisis


It looks like the European authorities are making progress in resolving the Greek problem.

According to a draft plan released today to resolve the debt crisis, the European Financial Stability Facility (ESFS) will be given the right to buy bonds on the secondary market.

In addition, troubled banks will receive financial assistance from the EFSF for recapitalisation. Analysts at Brown Brothers Harriman point out that the ECB would now be relieved of its heavy burden - the central bank would no longer have to perform the function of lender of last resort, which consists in providing loans to commercial banks in unforeseen circumstances and when they have no other way to get the money.

The plan also implies a reduction of interest rates on EFSF loans to 3.5% and an extension of their repayment period from 7 ½ to 15 years.

BBH specialists underline that market optimism has grown, since the EU seems to want to give the EFSF more flexibility and increase its size.

It should be noted that, for its part, the European Central Bank seems willing to concede by allowing the acceptance of selectively defaulted securities as collateral, which would save the Greek banking system.

 
margaret:
The US Dollar has fallen to a low of 78.33 against the Japanese Yen, back to mid-March levels, but some observers nevertheless do not expect intervention /presumably unilateral/ from the Japanese authorities to stop the Yen rising. This is because "even though the yen is appreciating, the Nikkei index is trading steadily and we do not foresee any adverse effects from a stronger yen," says Citi's Osamu Takashima. The yen is also rising against the dollar, but is relatively weak against the euro and other currencies. "The fall in the dollar/yen pair is caused by US factors, not Japanese ones," says Takashima. - That's why it's hard for the finance ministry to decide to intervene."
Overnight, and it's going to go down.
 
Margaret, what was Benny's story there, if you know it? Thank you in advance.
 
s_aullma:
Margaret, what was Benny's story there, if you know it? Thank you in advance.
Sounds like he's having second thoughts....
 
John Taylor, founder of FX Concepts, the world's biggest currency hedge fund, expects tensions over the eurozone debt crisis to ease over the next three months.

Experts believe that the market's risk sentiment will improve for a while and the gold price will rise to $1,900 by October. Taylor is also bullish on commodity currencies, the Australian and Canadian dollars.

However, the economist believes that such a rise in demand for higher-yielding currencies won't last long. After reaching a record high, gold will fall to $1,100 as the world economy will be gripped by recession, which will be stronger than in 2008.

According to Taylor, the United States will run out of money to prevent an economic downturn. The European economy is also likely to start declining, the analyst says. In his view, the EUR/USD pair will fall to $1.15 and beat the parity level with the US dollar next year.

 

Analysts at Societe Generale believe that European leaders will be able to reach an agreement today. The question is whether it can at least temporarily improve market sentiment. Overall, despite the possible skepticism of investors regarding the decisions of the Eurozone leaders, experts believe that the euro will be supported.

Commerzbank's strategists say that situation in Europe has gone too far and has become too dangerous for the EU to afford not to conclude an agreement on financing Greece. If the country gets a bailout, the euro will be able to resume its recovery, at least in the short term.

Lloyds economists expect a slew of announcements and promises to be made at today's summit. In their view, there could be some other plan to help Greece alongside the expansion of the EFSF, such as an offer to buy bonds on the secondary market. It should be realised that not all of the problems of a monetary union can be solved today, the bank noted. Nevertheless, if Europe demonstrates a firm intention to develop a viable systematic mechanism to support the troubled states in the region, it will be enough to stimulate investors' appetite for risk.

Barclays Capital strategists stress that any comments on fiscal consolidation in the EU or the issuance of common European bonds will signal a rise in the euro. Without this, improving market sentiment and narrowing spreads will trigger profit taking, supporting high trading volatility.

 

Die Presse

Sarkozy and Merkel agree on new financial aid package for Greece
At hours-long talks in Berlin, Sarkozy and Merkel echoed the arguments of ECB President Trichet and contacted European Council President Herman Van Rompuy, who will present the German-French position at a summit in Brussels.
La Repubblica
Barroso: "The situation is complicated. The fate of the euro is at stake".
Only a softening of Germany's position will allow the EU summit in Brussels to find a solution that can save Greece from bankruptcy but most importantly, stop the financial markets' siege on European debt. In this war, Italy finds itself on the front line.
The Washington Post
Italy's example: Europe is running out of time to solve its financial problems
Suddenly the danger of a spreading debt crisis engulfing countries on Europe's periphery is no longer theoretical. It is one thing to save Greece. But it may not be enough money in all of Europe to save the trillion-dollar economy of Italy or Spain.
The Wall Street Journal
IMF warns: eurozone crisis could spread globally
European countries need deeper economic integration to avoid succumbing to the debt crisis that threatens their currency union, according to an IMF report. The report was a strong warning from the IMF about the viability of the euro zone.
 
margaret:
Looks like he's having second thoughts....
That's pretty much what I was thinking. "Out, shut up and left." Thanks again.
 
International rating agency Fitch Ratings has upgraded Ukraine's sovereign rating outlook from "stable" to "positive" and affirmed the rating at B, the agency said in a press release.
 
margaret:
International rating agency Fitch Ratings has upgraded Ukraine's sovereign rating outlook from "stable" to "positive" and affirmed the rating at B, the agency said in a press release.

???
Reason: