FOREX - Trends, Forecasts and Implications (Episode 5: July 2011) - page 228

 

Economists at the Bank of New York Mellon note that once the US government and Congress finally reach an agreement on raising the debt ceiling, the dollar will recover. From their point of view, the USD is likely to show the most growth against GBP as the market was too worried about the prospects of interest rate increase in the UK, where the inflation is very high, but low economic growth does not allow the Bank of England to increase the cost of financing.

At the same time, specialists of the Bank of Tokyo-Mitsubishi UFJ warn that if the problem with the national debt is not solved by the deadline of August 2, the United States will face another recession. In their view, if the country loses its highest credit rating AAA, then at first it will not have a strong impact on markets, but later it will seriously affect the U.S. currency.

Analysts at Barclays Capital believe that the GBP/USD pair could rise to $1.6385 and $1.6425 in the short term. Support for sterling is located at $1.62. As for USD/JPY, strategists advise investors to sell the dollar against the yen as it rises to 78.75. In their view, the pair is on the way down to 77.50.

 

US President Barack Obama has proposed that Congress increase the $14.3 trillion national debt ceiling by $2.4 trillion, but House Speaker John Boehner has again refused to continue talks with the White House, calling on rank-and-file Republicans to join forces to prevent Obama from getting the money without guarantees of government spending cuts.

Mohammed El-Erian, one of the heads of Pacific Investment Management Co, the world's largest bond fund, believes the United States could lose its top AAA credit rating even if MPs agree to raise the borrowing limit.

The specialist warns that the country is already suffering from weak economic growth and high unemployment, and the debate on sovereign debt is only adding to the uncertainty, exacerbating the situation in the country.

Standard & Poor's rating agency estimates that the likelihood of a downgrade in the US within three months has risen to 50%.

At the same time, the yield on the country's key 10-year bonds stood at 2.96% on 22 July, below the 5-year average of 3.71%.

 
Moody's today downgraded Greece by three notches. The agency explained its decision by the fact that after last week's decision to provide the country with a €159bn financial bailout, default risks remain in place.
"The adopted programme suggests that the probability of a distressed state facing default is now estimated at virtually 100%," Moody's said. That said, the rating agency is generally positive about the approved bailout plan for Greece, hoping it will help stabilise the situation and reduce debts.
 
The situation in the USA continues to dominate the market as President Obama's negotiations with Republican representatives have resulted in a stalemate. As a reminder, the US has until 02 August to decide on the deficit limit.
 

BBC

US Treasury secretary believes in debt compromise
Timothy Geithner said he was confident in the ability of the White House and Congress to agree on raising the country's debt ceiling.

Deutsche Welle
Porsche presses on gas: company plans to double car sales
Car maker Porsche plans to increase the number of model ranges from four to seven. According to the plans of its top management, sales volume within seven years should double to 200,000 cars.

Experts: Euro crisis will cost Germans almost 71 billion euros
The debt crisis in the eurozone may cost German taxpayers more than 70 billion euro. This is the prediction made by experts at the German Institute for Economic Research.
 

A partial default on Greek government bonds will occur at the end of the summer and the start of autumn this year. This is when a voluntary exchange of Greek bonds, bought by private investors, is scheduled to take place for longer-dated securities.

A European Union spokesman said today that the bonds will be exchanged for new ones within a few weeks to minimise the period during which Greece will be in selective default (SD), Reuters reported.

"The exchange of securities is likely to take place in the last days of August and the first days of September. During this period Greece will be in selective default, according to the rating agencies. The period of default will be quite short," the official said.

Under the new Greek bailout programme approved at the end of last week, private creditors will lose around 21% of the value of Greek government bonds they hold. In all, the private sector will contribute a total of $37bn to Athens' bailout programme over the next three years.

Funds for the programme will be raised through a variety of debt swaps, as well as buying Greek bonds on the secondary market and rolling over the loan by transferring expiring bonds into 30-year instruments.

At the end of last week eurozone leaders agreed on a new bailout programme for Greece, which is on the brink of default. At the summit it was decided to give Athens 159 billion euros for a period of three years - 109 billion euros from the EU and IMF and 50 billion euros from the private sector. At the same time the term of future loans to Greece will be increased from the current 7.5 years to 15 years. As a last resort, an extension to a 30-year period with a 10-year grace period is possible. The interest rate for Athens would be only 3.5% per annum compared to the current 4.5-5.8%.

At the same time banks and insurers will be able to voluntarily exchange their Greek government bonds for securities with a longer circulation period and a lower interest rate.

 

Now there's a chance of a rebound in the dollar franc...

that's what it looks like...

we'll see...

 

*The opening was a rip (Gep/Alpari) :-)

 
There's no way it can pass the 1.4329 level. It's more likely to make a new high and go south. IMHO.
 
andreika:
There's no way it can pass the 1.4329 barrier. IMHO.


I agree, the eurik is up and the franc is further down.

But there will be a bounce first.

Reason: