Greek Debt Restructuring Concerns Savage The Euro | May 23, 2011

May 23, 2011 By
EURUSD

The Euro experienced heavy selling on Friday after the ECB rejected proposed restructuring

Good morning. Equity and Commodity markets finished on Friday in the red, with traders moving away from risk assets. Disappointing Existing Home Sales data on Thursday coupled with debt restructuring concerns in Europe, led to a equity wide selloff. Middle East tensions also plagued the headlines, with Syrian officials receiving little support from the West. The US government announced that assets held by the ruling party in the US would be frozen. This comes after reports of heavy civilian causalities. Key economic data released this week includes New Home Sales (market expects 300,000) on Tuesday, Durable Orders (market expects -2%) and Crude Inventories on Wednesday, GDP (market expects  2.0%), Initial Claims (market expects 400,000) and Continuing Claims (3.7m) on Thursday and Personal Income (market expects 0.4%), Personal Spending (market expects 0.5%), and Pending Home Sales (market expects -1.8%) on Friday.

On the equity market front, the S&P500 closed Friday’s session 0.77% lower. Safe haven buying pushed consumer staples and discretionary companies Kraft and Disney higher on Friday. Both companies bucked the overall negative trend for the day. Key corporate earnings released this week includes Campbell Soup and Krispy Kreme, with both companies expected to fall in line with estimates.

On the currency front, the Japanese Yen continued to trade in a range on Friday, with the currency touching 81.67. With no major economic data released during the session, traders moved away from the yen and traded the higher risk currencies of the Euro and Pound. According to reuters reports, the Japanese budget contraction is expects to hit almost 10 trillion yen leading up to the years 2010-2015. Traders also eyed the potential for intervention from the BOJ in light of recent movements in the pair. Aussie dollar followed the yen during the session, with little or no movement recorded. Trading in a band, the currency pair touched 1.0671, before weakening. Awaiting next weeks’ key policy announcement, the market is factoring in the potential for further support in the resources sector. Recent weakness has spurred a sudden and knee jerk attention to buying. The AUDUSD traded at 1.0671, with a sharp rebound in afternoon trade recorded. Euro weakened considerably against the greenback with news that Greek would be downgraded by fitch. Announcing a B+ rating, the agency cited continued pressure from borrowing costs and economic instability. With both Greece and Portugal experiencing significant monetary loss, the market cautiously watched for further debt contagion commentary. The disappointing announcement from Fitch during the session spurred on a rise in demand for the safe haven currencies, like the Swiss Franc and Japanese Yen.

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Jobless Claims Shake Economic Recovery | April 15 2011

April 15, 2011 By
GBPUSD

Pound Sterling received an unexpected boost as consumer confidence levels recovered.

Good morning. Equity markets opened the Thursday session on a weaker note with European debt woes, and Jobless Claims influencing movements. Reporting a rise in Initial Claims to 412,000, the market had originally factored in 385,000. The Producer Price Index also painted a softening in the economy with 0.7% recorded for the March period. Economists had forecast 1.1% for the period. Across the Atlantic, European debt worries flagged the markets. Speculation that European leaders were discussing the potential for further restructuring in Greece, led to a sell off in the major currencies. French Economic Minister La Garde was adamant that the role the EU had taken on the issue of debt default was adequate. Economic news set to be released on Friday includes CPI, Core CPI, Industrial Production and Capacity Utilisation. The market has factored in a CPI level of 0.5% for March.

On the equity market front, the Dow Jones was slightly weaker in early trade as markets reacted to economic concerns. Technology companies weighed on the indices, with private computer sales data released, indicating a softening in the market. Google is expected to release strong results after today’s market close.

On the currency front, Pound Sterling bucked the risk trend, with the currency rising against the greenback. Trading at 1.6338, the pair reacted to a weaker Euro, with traders switching out of the currency into the GBP. British consumer confidence data also contributed to gains, with the market comfortable with the current levels recorded. Key economic figures in the US are expected to refine the trend and confirm the direction of many of the commodity based risk pairs.  The Swiss Franc experienced consistent buying pressure on Thursday with the currency pair trading at 0.8931. Opening weaker, the USDCHF consolidated at lunch time before recovering late in the day. Swiss company Roche announced a disappointing fall in 1st quarter sales, with the company highlighting the growing problem of a stronger currency. Exporters and the tourism sector have been significantly impacted by the appreciation.  Japanese Yen rallied against the greenback on Thursday with the currency reacting to news in Europe. Fears of another debt contagion resulted in safe haven buying and strength in the Swiss Franc and the Yen. Traders also looked towards changes in the bond markets, with Japanese investors purchasing an extensive amount of overseas debt. Recent appreciation in the greenback has been attributed to the G7 Intervention after the devastating earthquake and tsunami. The USDJPY traded at 83.27.

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Inventories Data Affects Oil Prices | April 7, 2011

April 8, 2011 By
AUDUSD

Aussie dollar rallied off the back of a decisive carry trade scenario

Good morning. Equity and Commodity markets opened the session slightly firmer with Light Crude Oil influenced by inventories data. Reporting 1.95 million for the period, the figure came in below the previous month of 2.94 million. Economists have noted the impact of the Libyan Civil War on the price. Other economic news released included the MBA Mortgage Index. This paints a picture of the sustainability of the mortgage market. The index was still in a contracting phase, with -2.0% recorded. This was a vast improvement from the previous -7.5%. Across the Atlantic traders eyed key monetary policy decisions from the ECB and Bank of England. Industrial Output data released in the UK disappointed the market and indicated that the economy was still in a slow recovery. Economic news released on Thursday in the US includes Initial Claims, Consumer Credit and Continuing Claims. The market has factored in 386,000 – 388,000 for initial claims. This will be a slight improvement from the previous period.

On the equity market front, volatility in the S&P500 fell with the market trading in a range early in the day. Key corporate announcements during the early part of the session included broker downgrades for car manufacturer BMW, and Financial Services Provider Commerzbank. Analysts highlighted key macroeconomic risks. Both stocks fell greater than 2%.

On the currency front, The Aussie Dollar rallied against the greenback on Wednesday, with traders looking for a carry trade scenario. Although the RBA kept rates on hold, the market expects a rise in the coming months. Buoyant commodity prices during the session, coupled with expectations of a jump in employment figures contributed to movements. The AUDUSD traded at 1.0425, with a session start close to 1.032. Breaking through 85, the Japanese Yen continued to weaken against the greenback. Traders continued to highlight yield play as a key level of measure. With the Bank of Japan expected to keep rates on hold, the US dollar came into favour. The differential between the two currencies has come under scrutiny, with intervention measures warranted. Since the G7 intervention, the Yen has weakened considerably against the majors. The USDJPY traded at 85.27. ECB speculation drove the Euro higher on Wednesday. Trading at 1.4335, the market reacted to news that the Central Bank was looking at increasing rates to combat inflation. Economists were also confident that the move would herald a shift in sentiment towards the Euro zone. Recent market reactions to debt contagion and crisis had a damaging effect on the smaller European countries. Trichet is forecast to raise rates by 25 basis points.

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Portugese Debt Weighs on Euro and Pound | March 24, 2011

March 24, 2011 By
GBPUSD

Pound weakens in response to proposed Portugal austerity measures.

Good morning. Equity markets were slightly firmer overnight with a slew of mixed corporate and economic news driving movements. New Home Sales data for February came in below forecasts with 250,000 recorded. The market had factored in 288,000. Crude Inventories reached 2.1 million. Initial Claims and Durable Orders data will be released on Thursday in the US. Across the Atlantic, European debt woes continue to influence the currencies, with the market concerned over the Portuguese austerity vote. The Prime Minister resigned after the EU voted not to implement extensive austerity on the country. The move signalled political uncertainty in the country. Japanese officials on Wednesday confirmed that the earthquake and tsunami had cost the country $308 billion. Traders speculated that the rebuilding phase would require significant natural resources, pushing the mining sector higher in trade.

On the equity market front, the S&P500 rose 3 points with Micron Technology driving gains in the Semi Conductor space. Reporting a better than expected revenue figure for the period, the company’s net income fell to $72 million. Software provider Red Hat rose 10% after the company announced revenues of $244 million for the period. Analysts estimated $235 million in revenues.

On the currency front, the Pound reacted to news that budget forecasts were lower than expected. Revising growth levels and projections for the year, the Bank of England highlighted the risk of debt contagion in Europe and World geopolitical events. Markets pushed sterling lower during the announcement, with the currency touching 1.6252. Strengthening slightly against the greenback, the Japanese Yen tracked market sentiment for much of the session. The flight to safe haven currencies continued to put pressure on the US dollar midsession. Recent intervention measures from the G7 countries also spurred further speculation of a double dip recession in the global economy. Traders were cautious during the session, with many watching the nuclear crisis eagerly. The forecasted weakness in GDP and growth estimates during the session temporarily led to a spike in the pair. The USDJPY traded at 80.96.

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ECB Hints A Rate Rise | March 4, 2011

March 4, 2011 By

EURUSD

Good morning. Commodities came under pressure on Thursday, with equity markets spurred on by risk appetite. Initial Claims data came in better than expected with a fall to 368,000 for the period. Markets factored in a figure of 400,000. Thirty year mortgage rates and Housing demand continued to paint an uncertain economic picture. Recent data from the US government highlighted a significant disparity between new home and existing home sales. US President Obama reiterated his stance on Libyan leader Gaddafi, with the leader voicing his continued opposition. The news had little impact on the oil price with the commodity finding resistance at $102. Across the Atlantic, interest rate talk spurred a rise in the local currencies with the ECB highlighting the potential for inflationary pressure. This would effectively translate into a shift in monetary policy.

On the equity market front, the Dow Jones rose 1.5% to close up 191 points. Gains in the Financial and Media sectors helped support the major indices. Newscorp received a favourable ruling from the British authorities with the company set to purchase the remaining shares in British Sky Broadcasting. The announcement led to a 1.6% rise in the stock. The retail sector also bounced during the session, with Zumiez rising off the back of better than expected same store earnings.

On the currency front, comments from the ECB pushed the Euro higher against the greenback on Thursday. Indicating a possible tightening in monetary policy in the coming months, the European Central Bank focused on the growing disparity between the Euro zone. With the debt contagion crisis overshadowed by political events in the middle east and Libya, traders have been focusing on the base line economics and GDP forecasts. The EURUSD was flat early in the day before spiking to 1.3961 late in the session. Strength in the greenback led to declines in the Japanese Yen on Thursday. Trading at 82.33, the currency reacted to news that the BOJ had reduced their growth forecasts. Indicating that deflation could be a long term problem for the economy, the Bank of Japan was cautious over the interest rate situation. Economists have recently voiced their concerns over the long term economic sustainability within the region. Flat session for the Aussie dollar with the currency reacting to building construction data. Reporting a fall of 15.9% for the January period, the ABS highlighted the degree of movement from the previous period. This initially alarmed the market with the AUD falling to 1.0123 before rebounding to 1.0154. Trading on light volumes, the market also factored in the possibility of another interest rate rise in the coming months. Recent comments from the RBA have eluded to this fact.

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Gold Breaks $1400 An Ounce | December 29, 2010

December 29, 2010 By

Gold Breaks $1400

Good morning. Gold led the equity and commodity markets higher on Tuesday with the precious metal breaking through $1400 an ounce. Continued speculation over Housing prices and demand was highlighted in the Case Shiller index with a significant fall for the October period recorded. Traders were disappointed with the result pushing the greenback lower against the major base currencies. This translated into a flight to safety and a stronger gold price. Falling 1.3% for the month, the housing index highlighted potential long term economic problems and a growing divide between Main and Wall Streets. Consumer confidence figures also weakened considerably. In contrast to this result, retail sales for the December and Christmas periods are expected to reach record levels. Across the atlantic, Europe was relatively quiet with London closed for a public holiday and limited economic news. Fears of debt contagion continue to plague traders minds with the Euro swinging violently throughout the session.

On the equity market front, the Dow Jones closed 21 points higher, with the energy and commodity sectors boosted by a weaker greenback. Surprisingly several retailers including Macys struggled during the session, with the tech sector continuing to underperform. Automotive giant General Motors rose 2% in normal trade hours, with Barclays and Credit Suisse raising their forecasts for the stock.

On the currency front, comments from Japanese Finance Minister Noda had a dramatic impact on the currency pair on Tuesday. Falling to 81.88 after lunch, speculation that the BOJ would intervene in the currency market had little stabilising effect. The recent depreciation in the USDJPY has led to concerns over the impact of bond purchasing measures and the growing discourse of public debt in Japan. Economists have reassessed their forecasts for the Japanese economy in light of the current conditions and the impacts of a strong yen on the export market. The question of when the Japanese government will enter the market again will drive volatility in the currency.

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