Draghi to Greece: Good, but not good enough; Euro breaks $US1.29 | 10th October 2012

The Euro maintained a second day of losses amid conjecture surrounding Spain’s likely request for aid, with broad-based Greece concerns also reentering the fray. European Central Bank President Mario Draghi said although there has been “significant” progress in Greece, more needs to be done. “It’s quite clear that the progress at the level of undertaking the necessary policy reform has been perceptible and significant and it’s also clear that more needs to be done,” Draghi told the European Parliament committee. The Euro fell below $US1.29 for the first time this week to lows of $US128.58.

Markets are also taking a defensive position ahead of third-quarter corporate earnings which are expected to see around a 2 percent fall in profitably in annual terms. After last week’s slide, the Aussie dollar continued to find form with strength against the Euro leading the charge.

The Swiss franc and Danish Krone slid against major counterparts as US custodian banks State Street and Bank of New York Mellon said they will charge holders of the safe-haven units. Although BNY Mellon does not charge for Franc deposits, they have recently begun to charge for holders of Kroner, while State Street will apply a fee on both Krone and Franc’s in an effort to protect already insignificant profit margins. The USDCHF pair currently remains well-supported around 10-day highs of CHF 0.9417.

Markets were also on the back foot after yesterday’s IMF decidedly gloomy global forecast. The IMF forecasts that the global economy will grow 3.3 percent this year, down from July’s estimates of 3.5 percent, while revising 2013 growth down to 3.6 percent from 4.1 percent earlier this year. The IMF said “confidence in the global financial system remains exceptionally fragile,” while adding “Risks for a serious global slowdown are alarmingly high,” citing Europe as a major stumbling block. Earlier Monday, the World Bank cut growth expectations in East Asian and the Pacific. The Bank expects growth to slow from 8.2 percent in 2011 to 7.2 percent this year, before edging higher to 7.6 percent in 2013. The report noted weaker exports and lower investment growth will slice 1.6 percent from China’s bottom line in 2012, with GDP expected to fall from 9.3 percent in 2011 to 7.7 percent in 2012. Growth in the region is expected to bounce back to 8.1 percent in 2013, with policy easing and central bank stimulus expected to reverse the trend. There are no domestic data releases scheduled for today.