Posts Tagged euro
Dealers Digest Central Bank Views And Buy Bonds
Posted by Tetyana Matychak in Investing on September 1st, 2010
Friday’s initial response to the words from Ben Bernanke is being reversed on Monday. Bond yields jumped sharply as the Fed Chairman said that the FOMC stood ready to perform whatever action necessary to safeguard the economy from failing. Investors immediately looked beyond the action of further quantitative easing and took this as a sign that ultimate economic recovery would be bearish for bonds.
Eurodollar futures – Short-end Eurodollar futures are making gains again on Monday with the rise in deferred maturities almost at a double-digit pace. September treasury note futures have climbed by a half-point this morning to stand at 125-23 to yield 2.59%. The initial response to the speech at Jackson Hole in Wyoming was a fear that meaningful measures to support the U.S. economy would revive growth sufficiently so as to put the era of extremely low interest rates at risk. But as dealers ponder further this morning the renewed buying suggests that they recognize that although the Fed is prepared to act, it can’t go the distance without a confluence of other resources pulling in the same direction at once.
European bond markets – September bunds have recovered from Friday’s slump to 133.25 as weaker longs were knocked out of the market. The contract has climbed once again on Monday to 134.19 where the yield of 2.13 stands seven basis points below that at Friday’s close and compares to last Monday’s record low of 2.09%. The demand for German bunds remained firm despite the headwind of relatively bullish economic data. A European Commission report showed a rise to a two-year peak in confidence in the economic outlook. An unsourced report running in today’s Financial Times says that the ECB will extend its emergency aid to the region’s banking system through 2011. Euribor futures made minor gains on the story. Read the rest of this entry »
ECB Governor: Rates On Hold
Posted by Tetyana Matychak in Banks on June 14th, 2010
European Central Bank governor Athanasios Orphanides indicated in an interview with Dow Jones Newswires that interest rates in the euro zone will remain on hold for many months, urging European politicians to tackle yawning inefficiencies in fiscal governance.
If Europe’s leaders fail to get their act together, then another financial crisis or debt crisis may well be around the corner, he warned.
Speaking in an interview following the ECB’s policy-setting meeting on Thursday, Mr. Orphanides said the outlook for consumer price inflation in the euro zone remains benign, despite the recent uptick in prices.
Core inflation, which excludes volatile components such as energy and food, has been trending down, he said, pointing to slack private consumption in the 16 countries that make up the euro zone.
“In light of these developments, I do not view high inflation as a concern,” said Mr. Orphanides, who was born in Cyprus and educated at the Massachusetts Institute of Technology. Read the rest of this entry »
Bank Issues, Jobs Data Drives Euro To 4-Year Low
Posted by Tetyana Matychak in Currency on June 8th, 2010
After holding steady for a few days, the Euro plunged through the recent bottom to post a 4-year low. This morning’s move came as a surprise to many traders who had expected the single-currency to hold its range until after the release of the employment number.
Traders are saying that this morning’s sharp break was a reaction to new concerns about the health of European banks. Investors are concerned that mounting debt issues across the Euro Zone will erode investor confidence in the Euro and slow down the rebound in the global economy. Many traders were surprised by this morning’s move which caught traders off guard as they awaited the release of the important U.S. jobs data report.
The GBP USD is also under pressure because of the drop in risk appetite. The charts indicate that a test of 1.4499 to 1.4435 is likely over the near-term.
Plunging equity markets are triggering a possible reversal top in the USD JPY. Traders are dumping risky assets following the plunge in the Euro and the weaker than expected U.S. jobs data report. The Dollar/Yen is trading back under a .618 retracement level at 92.41 which makes 91.61 a new downside target.
Falling demand for higher risk assets is helping to drive the USD CAD higher. The main trend is down, but upside momentum is building which could trigger a reversal of this trend on a breakout over the last swing top at 1.0573. Read the rest of this entry »
Commodity-Linked Currencies Suffer Huge Losses
Posted by Tetyana Matychak in Currency, Favourites on June 7th, 2010
The weaker-than-expected U.S. employment report helped trigger a flight-to-safety rally in the Dollar while driving investors out of commodity-linked currencies. Aversion to risk weakened U.S. equity and global commodity markets, helping to drive up demand for the lower-yielding Japanese Yen. All three major commodity-linked currencies – Australian Dollar, New Zealand Dollar and Canadian Dollar – suffered huge losses, leading to speculation that this trend is likely to continue next week.
The U.S. Dollar Index made a new high for the year, boosted by the sharp sell-offs in the Euro, British Pound and the commodity-linked currencies. Gains were limited slightly by the rise in the lower-yielding Japanese Yen.
The initial catalyst behind the U.S. Dollar’s rise on Friday was the news that Hungary is in the midst of a fiscal crisis of its own. This news caught many traders by surprise because most were focused on the upcoming U.S. Jobs Data Report. After the first thrust to the upside, gains were extended when the government reported that the number of jobs created during May fell far below the consensus.
Economist estimates were for an increase of about 513,000 new jobs. The U.S. Labor Department reported an actual increase of 431,000. This news was bearish in itself, but the traders were really surprised when the internals of the report showed that of the 431,000 new positions, 411,000 jobs were created by the U.S. government. This figure was primarily made up of short-term census workers. Read the rest of this entry »
Stock futures fall after euro hits new 4-year low
Posted by Tetyana Matychak in Fund Markets on June 1st, 2010
Stock futures tumbled Tuesday after the euro fell to a new four-year low. Major U.S. indexes are set to resume their slide due to fresh concerns about the health of Europe’s economic recovery. Stocks fell late Friday ahead of the long holiday weekend after Fitch Ratings cut its view on Spain’s debt.
A slowdown in manufacturing in China also worried investors. U.S. traders will get a reading on the domestic manufacturing sector after the market opens.
The Dow Jones industrial average fell 122 points Friday. Dow futures are down another 120 points early Monday.
The euro fell as low as $1.2112 before easing off that low to $1.2155. Markets worldwide have been tracking the euro, the currency used by 16 countries in Europe. The euro has been seen as an indication for confidence in whether countries like Greece, Spain and Portugal will be able to cut spending to contain mounting debt without stalling a recovery.
Investors in recent weeks have used any signs of weakening around the world to sell stocks and move into safe-haven investments like the dollar and U.S. Treasurys. Read the rest of this entry »
Euro-zone troubles may keep stocks on edge
Posted by Tetyana Matychak in Fund Markets on May 17th, 2010
Stocks could face more volatility this week as growing doubts about whether Europe can solve its deepening debt crisis are likely to take center stage again.
A $1 trillion rescue package unveiled at the week’s start gave only temporary relief to investors, who are increasingly worried about the impact of the crisis on the global recovery and the euro.
Wall Street also will be anxious to see the results from retailers next week, and will pay special attention to their forecasts for the rest of the year. Wal-Mart Stores (WMT.N) and Lowe’s Co (LOW.N) are among companies expected to report.
Below-par results on Friday from retailers, including Nordstrom (JWN.N) and J.C. Penney Co Inc (JCP.N), cast some doubt on the consumer’s health.
The week also brings government data on inflation, which is expected to remain tame, and on housing, a sector still struggling to recover from the country’s worst economic downturn since the 1930s.
The three major U.S. stock indexes ended Friday’s session with losses ranging from 1.5 percent to 2 percent amid worries over Europe’s debt problems. The CBOE Volatility Index .VIX or VIX, which is Wall Street’s fear gauge, jumped 17.1 percent. Commodity prices also dropped sharply, with oil sliding to a three-month low below $72 per barrel. The euro fell to an 18-month low against the dollar. Read the rest of this entry »
Europe’s Debt Crisis Is About to End
Posted by Tetyana Matychak in Favourites, Trading Markets on May 6th, 2010
With the likes Nouriel Roubini, Jim Rogers and George Soros predicting a disastrous default by Greece and others in the euro zone, the contrarian in me has to ask if they could be very wrong. Sources from the City of London who would not go on the record have told me this week that Greek debt is currently a screaming buy.
They believe huge profits will be made for those holding Greek paper when Germany, the IMF and ECB outline a new rescue package that will convince investors they are serious about drawing a line in the sand on the sovereign debt crisis.
Rumors of a European TARP moment could yet be unfounded but with Merkel now serious about getting to grips with the crisis, investors who stay short Greek debt over the weekend could be scrambling to reverse their positions on Monday morning.
Officials at Greece’s debt agency did not respond to CNBC requests for comments. Fears over the long-term health of the euro zone remain high and it is difficult to argue with those who see the possibility of some members exiting the euro on a long term view.
Adam Cole, the Global Head of FX Strategy at RBC Capital Markets, is a euro bear and thinks we could hit $1.10 or $1.15 versus the dollar over the medium term but suggests an announcement on Greece this weekend could offer temporary respite for the market. Read the rest of this entry »
The Betrayal of Greece
Posted by Tetyana Matychak in Trading Markets on May 5th, 2010
I gave a speech at an authentic Greek restaurant last night on the state of the world economy. It seemed only fitting that the topic drifted towards Europe and fears that the Greek debt crisis will spread to other euro zone nations. With dramatic headlines of Greek troubles spreading and the euro hitting fresh lows against the dollar, the situation grows more critical each day. But today’s news only highlights a part of the problem.
The real issue is one of denial and lack of resolve. When the European Union was formed more than 50 years ago, there was much hope and optimism that this trading bloc would become a dominant global force.
The euro marched forward as an alternative currency for trade challenging the US dollar as the global trading standard. Everything seemed to be progressing as planned until a bit of bad news spoiled the party. Turns out that some member countries are having second thoughts about honoring their responsibilities to each other and are now putting their own country’s agenda first. Meanwhile, as the debate continues on how to resolve the Greek debt problem, credibility is crumbling.
Measured self-interest is not a bad thing as every country has a right to make fiscal judgments that it believes are in the best interests of its citizens. But it’s also important for member nations to remember the pledge they made when they decided to become part of the European Community. The chant then was “all for one and one for all”. But it looks like that pledge only applies in good times and is instead subject to debate when tough times roll in. A union should be just that; a union. And the self-interest that is percolating throughout Europe is a grave threat to the solidarity of the euro zone. Read the rest of this entry »
S&P Downgrades Spain
Posted by Tetyana Matychak in Favourites, Trading Markets on April 30th, 2010
Standard & Poor’s Corp. on Wednesday downgraded Spain’s long-term credit-rating by one notch, in a new sign of a deepening euro-zone sovereign debt crisis.
Spain become the third euro-zone nation to be hit with a S&P downgrade in just two days, following steeper cuts on Portugal and Greece. On Tuesday, S&P slashed its ratings on those nations, even junking Greece, amid concerns that nation’s policy options are narrowing because of weak economic growth prospects.
The ratings actions underscore mounting concerns that Greece could default on its debt and that European Union authorities are failing to halt contagion of its financial problems to other highly indebted euro-zone sovereigns. Spain, the euro zone’s fourth largest economy, is grappling with a double-digit budget deficit and faces years of weak growth following the collapse of a decade-long construction boom.
“Spain is the 800 pound gorilla in the room. Greece and Portugal are small countries, but Spain is about five times their size with regards gross domestic product,” Win Thin, senior currency strategist at Brown Brothers Harriman & Co, said in a note to investors.
The news of the Spanish downgrade sent equities in Spain broadly lower. S&P said it reflects a downward revision of its medium-term macroeconomic projections. Read the rest of this entry »
GLOBAL MARKETS: European Stocks Edge Higher
Posted by Tetyana Matychak in Fund Markets on April 29th, 2010
European stocks edged higher early Thursday, with investors finding some comfort in the U.S. Federal Reserve’s easy-money stance amid better-than-expected corporate earnings. However, overall sentiment remains one of caution given the euro-zone’s ongoing sovereign debt crisis saga.
The two-way pull between still decent macro and corporate news flow and the apparently deepening black hole of debt dug by the peripheral euro-zone economies will continue a while longer, said Ian Williams, strategist at Altium Securities.
By 0735 GMT, the Stoxx Europe 600 index was 0.3% lower at 259.94. London’s FTSE 100 index was up 0.2% at 5598.99, Frankfurt’s DAX. Read the rest of this entry »
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Consumer Spending in U.S. Rises More Than Forecast
30 August 2010
Monetary Policy Gets No Respect
19 July 2010
Stocks May Surprise By Year-End
5 July 2010
Is A Global Reserve Currency A Necessity?
28 June 2010
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