Daily Reviews of major currencies from Globe Gain Forex Rebates

07/02/2012 The euroarea tensions do not allow EUR to join the market rally

EUR/USD

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The Greeks haven’t agreed on the tougher austerity programme yet. The European leaders, in their turn, are increasing their pressure on the country, urging it to carry out the expenditure cuts sooner. Yesterday the euro had been falling until it reached 1.3030, but then another wave of stop-orders pulled the pair back above 1.31. It happened on the news that the government agreed to dismiss 15000 public sector workers. But it is not enough, and today the debates will be carried out against the background of large-scale strikes. Since the events are long-term, traders currently have a great deal of short positions, which does not allow the pair to fall lower in the absence of really important news, like, for instance, sharp easing of the monetary policy by the ECB or the uncontrollable default in Greece. It’s really interesting that the number of long dollar positions has been decreasing in the last few weeks. This has been mainly due to the recovery of the demand for risky assets in the global markets. Thus, it’s possible to say now that at present the single currency is mainly moving on its own regional news and is less than usual dependent on risk demand fluctuations and carry-trade...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/07022012-0940-euroarea-tensions-do-not-allow-eur-join-market-rally

08/02/2012 The Greeks only dropped a hint about the agreement, but the euro jumped to 1.3250

EUR/USD

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Greek Prime Minister Lucas Papademos has signaled that he is close to reaching the agreement over further austerity measures with the three major parties of the country. The agreement was to be concluded on Tuesday evening, but the event was postponed to Wednesday. Nevertheless, the markets reacted very positively to this news. The single currency jumped from 1.31 to 1.3260. As we know, such sharp jumps are caused by the negative positioning against the euro. The abundance of short positions triggers bursts in the euro on any rumors. However, facts shouldn’t be overlooked either. Yesterday Destatis published very poor statistics on the industrial production in Germany, showing a decline of 2.9% m/m and 0.9% y/y. It proved much worse than expected. Still, market participants hold out hope that the trend towards increasing business sentiment indexes is of great importance and soon will have a positive impact on the real economy. Time will show. Despite the positive news from Europe, the U.S. stock markets showed rather cautious growth: new highs are being taken with caution. The Fed’s chief in his turn gave quite restrained comments about Friday’s positive data on the labour market when speaking before Congress yesterday. He pointed out that the recovery is extremely slow. Basically, his speech was focused on the call for legislators to decide on the extension of the Bush tax cuts as soon as possible since uncertainty can considerably unsettle the markets...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/08022012-0812-greeks-only-dropped-hint-about-agreement-euro-jumped

09/02/2012 EUR short-covering gains momentum

EUR/USD

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The chances that Greece will receive another 130 billion package from the EU and the IMF significantly grew on Wednesday. On Thursday Eurogroup chairman Juncker convened the meeting of finance ministers to allocate money to Greece for it to avoid default. This news supports the single currency rate. The euro has already risen to 1.3280 against the dollar and is significantly growing against the pound and the yen. Later in the day the ECB will hold its regular meeting. Just a few are expecting a change in the rate, though some speak about the necessity of its lowering. The market participants mainly focus their attention on the comments of the Bank and its chairman Draghi about the Greek debt and further steps to maintain the market liquidity. These two issues more than anything now affect the ability of the region to survive the sovereign debt crisis. Earlier there were rumours in the market that the ECB could exchange the Greek debts into EFSF securities at prices lower than face value. It would be a concession to the debtor and could help private investors feel that they are not the only ones who bear direct losses. However, it’s rather doubtful if the ECB's losses on 40 billion debt securities will be this very factor which will help Greece to get out of the crisis. Nevertheless, the favourable news from the euro area may support a short-covering rally in the euro, triggering its bounce above 1.34....

Read full review: http://globegain.com/analytics/globe-gain-daily-review/09022012-1032-eur-short-covering-gains-momentum

10/02/2012 The Greek tragedy is not over yet

EUR/USD

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The story with Greece’s adoption of the austerity package in exchange for private debt restructuring and another aid package from the EU/IMF has virtually wearied everyone. And formally this story is not over yet. As it turned out, the Greek Prime Minister negotiated the details of austerity measures with representatives of the troika, who said they first wanted to see the legislative approval of saving measures and only then would consider the aid payment. Of course, the last point will be mainly formal and therefore quick to settle. It is to take place at the upcoming weekend. However, the troika’s fears are not at all groundless. Actually, Greece is on the threshold of elections, which will be held already in April. At such a moment none of the parties wants to be the one to promote tough economy. The meeting of the ECB’s governing council was also of great interest for the markets. There Draghi stated that the Bank plans to ease its collateral rules as, in their opinion, it is sure to help small banks and then to revive lending to households and companies. The euro rewrote the local maximum yesterday, having risen to 1.3320, but then sank to Thursday’s opening levels on the profit fixations in the stock markets. Now it is still holding there, around 1.3260.

GBP/USD

The Bank of England met expectations of the market, having extended QE by 50 billion pounds up to 325 bln...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/10022012-1033-greek-tragedy-not-over-yet

13/02/2012 Greeks agreed on austerity - euro-bulls breathed a sigh of relief

EUR/USD

The Greek parties adopted a package of fiscal austerity. 199 out of 300 deputies voted for the adoption of the package. 43 voted against and thereafter were expelled from their parties. The voting was held against the background of fierce riots in the streets of Athens and other large cities. However, all that along with the approaching elections did not prevent the austerity adoption which is to be followed by the allocation of money from the EU/IMF. The news in itself is good; the euro bounced up to 1.3260 during the Asian session, thus having almost made up for the decline on Friday afternoon. It’s interesting that the positioning against the euro should be, though less aggressive, but still close to the historic lows. This means that the euro in the coming weeks will have more room to move up than down. Judging by the charts, the euro has the potential to rise above 1.42 next month. At the same time the stock markets remain overbought. And it would be really interesting to know which of the market forces will prove stronger in the near future. The American S&P holds in the area of highs, from where it was falling in May and July last year. It is quite probable that for the next couple of weeks the purchases of risky assets will be still dominating the market on the strong data from the United States and the improved situation on the European interbank market. At the end of this week the ECB will hold the second LTRO auction.

GBP/USD

Following the euro, the British pound has been rising since the start of trading in Asia on the recovery of demand for risky assets and the dollar retreat....

Read full review: http://globegain.com/analytics/globe-gain-daily-review/13022012-1020-greeks-agreed-austerity-euro-bulls-breathed-sigh-rel

14/02/2012 Moody’s EU rating cuts put pressure on the markets

EUR/USD

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Moody's unexpected decision to downgrade 6 European countries has provoked an increase in demand for safe assets during the London session. The single currency didn’t manage to push the attack, having stopped at 1.3283. The EUR sales brought the currency pair below Friday’s low in the area of 1.3250. It’s really of interest for what time the pair will stay under pressure. After all, the market is already so much lopsided in relation to positioning plus the information about the ratings can hardly be called new as well. As a rule, the markets show the strongest reaction to the first steps taken by the rating agencies, while the further ones (and this is the case now) are generally ignored. It’s notable that despite the fact that ratings were cut mainly in Europe, the major movements today are observed not in the euro/dollar. There is enough news on other currencies as well.

GBP/USD

Yesterday the British pound got a heavy blow, from which it cannot recover even today. Rating agency Moody's put the British top rating to review for possible downgrade...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/14022012-0924-moody%E2%80%99s-eu-rating-cuts-put-pressure-markets

15/02/2012 Another pledge of China to help Europe supported EUR

EUR/USD

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Yesterday the euro was moving as if it were on a swing. After a certain growth above 1.32 at the start of trading in London there followed sales of the single currency. The euro weakened on the speech of Mr. Samaras, the New Democratic Party leader, who said that the adopted austerity measures wouldn’t last for long and that already after the elections they would be ignored. The most disturbing thing in this story is that Samaras is the leading candidate according to the preliminary polls. On springing fears the single currency fell to 1.3080 at the end of the day yesterday. Later, however, the euro was supported by the speech of China Central Bank Chief, who expressed his approval of the reforms, carried out by the European authorities to handle the crisis. The most important thing is that he promised to actively participate in the recapitalization of the European countries. On such news the euro as well as stock markets surged upwards, however it happened at the time when the trading range was narrow and volumes - small. Now the single currency is trading near 1.3170. The US retail sales figures showed a 0.4% increase in January, but at the same time December's growth of 0.1% was revised to 0.0%. Besides, judging by the annual growth, sales went up by 2% with the deduction of the inflation rate, which is not a particularly good signal. Major World CBs keep carrying out quantitative easing. The next step is to be taken by the Fed.

GBP/USD

Yesterday the British pound was falling for the most part of the day and received support only at 1.5650. The data on inflation mainly justified the forecasts, without causing any agitation in the markets...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/15022012-1042-another-pledge-china-help-europe-supported-eur

16/02/2012 EU plays Russian roulette with Greece

EUR/USD

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As it turned out, the very change of the status of the eurozone finance ministers meeting into a conference call signaled that no serious decisions would be taken. The lenders preferred to postpone the decision on the 130 billion allocation to the EU summit on February 20. It served as a sort of punishment for the political game of the Greek opposition. As has already been discussed, earlier this week Samaras, the leader of the New Democracy Party, mentioned that Greece would observe the severe austerity measures only for a couple of months. It was a purely political trick. And though Samaras wrote a letter of apology on this issue and vowed to honour the terms of the agreement, the Europeans didn’t find the joke funny. Now politicians promise to help Greece to avoid default in March, but are not very eager to enter into a long-term commitment. The lenders require a tighter control. It looks as though the Northern countries didn’t want to see Greece in the euro area at all and that’s why lay down harsher and harsher conditions, waiting when Greece refuses to fulfill them. A compromise is also possible: the country will be allocated the money required to keep it afloat and meet the obligations, but the size of allocations will be agreed on beforehand each time and the very fact of allocation will depend on how well Greece will be implementing the reforms. It’s quite logical that the euro should decline on such news. The single currency has already fallen down to 1.3010, its lowest level since late January. Even the data on the EU GDP, which actually exceeded the expectations, couldn’t help the euro. The decline in the fourth quarter made 0.3%. Germany lost 0.2% against the expected 0.3%. Compare it with the U.S. GDP growth of 0.7% over the same period.

GBP/USD

The data on the British labour market didn’t manage to smooth over the news background. The number of people on the dole increased by 6.9K in January...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/16022012-0929-eu-plays-russian-roulette-greece

17/02/2012 Euro has bounced up on hopes around the Greek agreement

EUR/USD

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The single currency fell below 1.30 during yesterday’s trading, but the increased optimism about the Greek deal caused a surge of growth in the single currency and it is now trading at 1.3130. The Greek politicians have announced that Europe’s finance ministers will decide on the allocation of funds on Monday, February 20. This is exactly one month before the crucial payment to redeem the bonds by €14.4 billion. Now we can only keep our fingers crossed that neither Greek nor any other politicians will invent something worse over Friday and the weekend. Remember that earlier the markets expected the decision on the allocation of 130 billion not until the election, scheduled for April. We believe that the probability of such an outcome has become lower, but hasn’t completely disappeared: over the past two years we’ve faced too many nasty surprises. Yesterday’s statistics were relatively good. U.S. producer prices has risen to 0.1%, which is actually less than expected and suggests that inflation still lets the Fed carry out additional easing. The annual rate of price growth has fallen to the lowest level since January 2011. At the same time the housing market is showing some signs of life. Last month housing starts made 699K at an annual rate, which is 48% more than the lowest figure, recorded during the recession. Though from a historical perspective, all these fluctuations look like scarcely conspicuous ripples on the bottom.

GBP/USD

The British pound feels better than the euro despite the fact that the latest news mainly concerns the eurozone. The sterling managed to rise from 1.5670 to 1.58 yesterday...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/17022012-1001-euro-has-bounced-hopes-around-greek-agreement

20/02/2012 Growth in demand for risk on the optimism around the Greek deal and Chinese easing

EUR/USD

The week began with quite an optimistic growth in global stock markets and strengthening of risk-sensitive currencies. The euro didn’t stand aside either, having risen up to 1.3230 at the opening. The euro is growing as, fortunately, over the weekend there haven’t appeared any factors that could prevent or postpone the Greek deal. The decision on another 130 bln aid package to Greece is to be taken today. The confidence of markets has increased after Merkel made it clear that the finance ministers are prepared to support the allocation of funds to Greece. This would be a logical step since the country adopted the required cost-saving measures at the legislative level. But, as we know, the issue with Greece consists in the very implementation of the adopted laws. It is a problem because, first, Greece has poor fiscal management and a large share of shadow economy and, secondly, the country suffers a sharp economic slowdown because of fierce austerity measures and investment outflow. And all that is the result of uncertainty around the country. Friday’s U.S. statistics showed a bit weaker monthly rise in prices (0.2% vs. 0.3%), but a higher annual growth rate (2.9% vs. 2.8%) than expected. The U.S. CPI has been slowing down since September - it has fallen from 3.9% over that time. Core inflation, on the contrary, is gathering pace. In January it made 2.3%, a year ago it was 1.0%, and in October 2010 it totaled just 0.6%. If the Fed paid as much attention to inflation as before, it wouldn’t be preparing to further ease the monetary policy, but would be looking to raise the rates. Have times changed? Today is President’s Day in the U.S., so there won’t be large trade volumes in the afternoon.

GBP/USD

The British pound displays a very good reaction to the statistics. In this sense it may be called the most convenient currency to trade on the news (or inconvenient, if you’ve got the opposite viewpoint)...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/20022012-1109-growth-demand-risk-optimism-around-greek-deal-and-ch

21/02/2012 Is it the end of the Greek drama?

EUR/USD

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Private lenders have agreed to write off the Greek debt by 53.5%, though earlier it was negotiated to cut the nominal face value by 50%, which corresponds to the 70% loss of the net present value. In addition, it’s been reported that an agreement on the second bailout package was also reached. Actually, rumours about a good state of affairs were circulating around the market all day yesterday, thus maintaining a high demand for the euro. The single currency got stronger yesterday and is now trading near 1.3270, compared with Monday’s opening level of 1.3150. Now it’s possible to say that risks of the unfavourable turn of events have significantly decreased, but this still doesn’t make up for the weakness of the economies, now facing considerable cuts in spending. However, the market is likely to celebrate the deal first and only then will switch over to this issue. We remind that the market now abounds in the euro short positions. Now EUR/USD is close to local highs, which means that the upward movement will trigger a wave of stop-losses. This, in its turn, may give rise to a wave of spikes, which can easily bring the euro to 1.35 after breaking the 1.33 level.

GBP/USD

The news from Greece has produced an invigorating effect on the pound as well. However, overnight the pair closed the gap, which started to form since the opening on Monday, but then it continued to move upwards again....

Read full review: http://globegain.com/analytics/globe-gain-daily-review/21022012-0941-it-end-greek-drama

22/02/2012 Markets hardly believe that the Greek saga is over and stay nervous

EUR/USD

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The single currency didn’t manage to show any significant dynamics yesterday. Despite the positive reaction of the market to the approval of a Greek bailout package, the euro sales broke out. But as there were no strong reasons to sell the euro, the downward movement didn’t get any support either. The euro got stuck between 1.32 and 1.33. But this concerns only EUR/USD. Against the Aussie, yen and pound, EUR feels much stronger. Risk demand manifests itself in the strengthening of equity markets and rise in the price of gold. Oil rides its own wave - geopolitics - but on the whole its trend coincides with the general movement. Under such circumstances the dollar usually declines, against the common currency as well, but this time it is different. Investors fear that the Greek deal will eventually fail, as there is still a lot to be done. The biggest risk factor here is obtaining the approval of the national parliaments, which will hardly be an easy matter. Americans are tired of waiting for the Syrian opposition to seize the initiative, so in Washington and the U.S. State Department it’s been decided to help the opposition. It will probably boost the dollar sales as well, because demand for commodities is likely to go up on such news, as was the case with Iraq and Libya. More tension may shortly come up from Iran as the country is unwilling to become the next field for Americans to sow their seeds of democracy.

GBP/USD

The pound is falling against the dollar and the euro, having dropped by 0.5% and 0.3% respectively. It’s mainly caused by investors’ anticipations that Britain will have to pay higher prices for oil imports after Iran stops its deliveries to the country...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/22022012-1048-markets-hardly-believe-greek-saga-over-and-stay-nerv

23/02/2012 The euro gradually strengthens its positions

EUR/USD

The euro is slowly but steadily recouping its losses against the dollar. The single currency is oscillating around 1.3255, but can already boast a series of rising lows. This means that the currency is bought on the dips and that it is ready to take higher levels. As to news, Spanish appeal for mercy is of real interest. Spain’s Prime Minister asked the EU to raise the budget deficit target from 4.4% to 5%. Rajoy called it impossible to reach such a tough budget austerity. He is right, but all this suggests that the EU’s numerous concessions to Greece take their effect now. The precedent is set and now each troubled country will try to better its lot, asking for a bigger piece. The market has generally ignored this news, trying to concentrate on the positive aspects. The demand for risk continues to gain momentum, which cannot but result in strengthening of the single currency in the long run. This state of affairs is also supported by the U.S. statistics. The housing market in the States demonstrates a greater vitality than before. In January the secondary housing market showed the sales growth by 4.3% up to 4.57 million at an annual rate. This is the highest sale pace since May 2010. But then the market was supported by the government, and now - by falling housing prices. The average price of a house on sale dropped to 154.7 thousand dollars, which is ten thousand less than last year’s average price. Obviously, Americans are ready to buy houses, but only the cheapest ones and at historically lowest interest rates. Nevertheless, banks offer such conditions, as money in the markets is relatively cheap.

GBP/USD

The sterling received a serious blow on the publication of the MPC meeting minutes yesterday. In the minutes it was said that two members of the monetary committee advocated a greater expansion of the programme...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/23022012-1053-euro-gradually-strengthens-its-positions

24/02/2012 Euro area rose to two-month highs on triggering of stop orders

EUR/USD

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The single currency has moved up on triggering stop orders and reached 1.3360. This level is the highest since mid-December. The rising optimism in stock markets and subsiding fears around Greece lead to partial liquidation of short positions in the euro. As has already been mentioned, the market is heavily tilted against the euro, yet its exchange rate has remained relatively stable so far. Thus, the upward movement of EUR/ USD has good chances to go on. This rally is supported by strengthening of stock markets on good reports and rise in prices of raw materials. Until recently the inverse correlation between commodity markets and the dollar has served well, helping the single currency to climb up. This time the long-term steadiness of this correlation is questionable because of the shifts in the euro area, which may keep exerting pressure on the performance of the eurozone economies for a long time to come. However, in the near term the single currency may get support from the markets. It’s not likely that the euro will face serious obstacles on its way to 1.35. European banks are supported by speculators on the threshold of the second 3-year LTRO auction. It is scheduled for the next week. The previous auction demonstrated the bank demand at 500 billion euro, and this time the volume is likely to be the same. With this tool at hand the ECB helps banks to ease the need for refinancing and to increase demand for government bonds.

GBP/USD

The punishment of the pound for ‘weak’ MPC minutes hasn’t lasted for long. Already throughout yesterday’s trading the pound managed to recoup most of its losses and return above 1.57...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/24022012-1027-euro-area-rose-two-month-highs-triggering-stop-order

27/02/2012 G20 promises to secure $2 trln in firepower

EUR/USD

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On Friday the single currency continued to rally and reached 1.3485. The growth was supported by positive expectations in regard to Europe, as well as by the trigger of stop orders in the euro short positions. The impulsive rise in the single currency may hold for some more time, but it is unlikely to last for long. Now Spain steps onto that very spiral Greece has been lately moving along. The Spanish government more and more realizes its inability to fulfill the budget plans. Haircuts have just begun. Nevertheless, the markets mostly ignore this fact, being happy with the G20’s promise to increase the firepower of international lenders up to $2 trln over the next two months. One thing is of interest – who will pay for this? By the way, the major developing countries (BRICS) are said to negotiate in detail the foundation of a bank for developing countries at the G20 meeting. It seems that the dynamic economies are not willing to participate in financing of the troubled euro area and prefer to focus on the growth in their own states and on the cooperation with other developing countries. However, one of factors sparking off the euro rally was China's statement about its readiness to provide the euro area with greater support. China heavily depends on the investor sentiment, so it is the country’s vested interest to maintain as much stability as possible in the euro zone, with which it has very close trading relations. Stock markets today will seek to take profits after a week of remarkable growth, which may eventually lead to the euro correction and drive the currency down to 1.34. However, there will surely be some more attempts to break above 1.35 this week.

GBP/USD

Britain's Chancellor manifested its firm stance towards tax cuts and stimulation of the economic growth through government spending...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/27022012-1014-g20-promises-secure-2-trln-firepower

28/02/2012 Greece’s rating is cut to selective default, but who cares?

EUR/USD

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S&P has downgraded Greece’s credit rating to selective default (SD). This decision hasn’t come as a surprise, as the agency already promised to do it a couple of months ago. For this reason, there haven’t been any sharp euro sales. The agency has also pointed out that if there aren’t enough private investors engaged in debt swap, the country will inevitably face outright default. However, as the technical analysis shows, the euro sales were just held during the day yesterday, not longer. EUR/USD fell to 1.3366 during Monday’s session, but already now trading is again conducted around 1.3440. Demand in stock and commodity markets remains strong. And current traders’ talks more and more resemble those of early 2008. Traders underestimate the consequences of the European issues now just like they underestimated the graveness of the situation in the US and the UK banking sector then. Investors turn their eyes to the developed countries, performing rather well at the moment, as if the poor state of affairs in Europe wasn’t likely to impact developing China and Russia. Of course, there has been a certain shift in the economic models of China over this time, but the fact still is that all the developing BRIC countries heavily depend on demand in foreign markets. Moreover, most of their capitals come from the U.S., Europe and Japan, which is a result of the soft monetary policy in these countries.

GBP/USD

Following the market recovery, the British pound also tries to demonstrate some growth. However, its dynamics leave much to be desired, which is especially noticeable in the pair with the euro...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/28022012-0856-greece%E2%80%99s-rating-cut-selective-default-who-cares]Read full review

29/02/2012 Markets see the positive everywhere

EUR/USD

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The US dollar continues the retreat started on Tuesday. The currency is declining while the markets generally remain optimistic, thus generating demand for risky assets. Yesterday’s data on investor sentiment supported the markets. Conference Board’s Index of Consumer Confidence has exceeded everyone’s expectations, having risen to 70.8 in February, the highest level in a year. The data on Durable Goods Orders and the S&P/Case-Shiller Home Price Index proved to be a bit disappointing. However, the orders largely increased over the previous months (4.2% in November, 3.2% in December), so together with the 4.2% decline in January the figures have restored to the trend levels. Housing prices in the U.S. remain low or in the downtrend. But it is no news as this trend has already been indicated in other reports. The Americans are not very enthusiastic about purchasing single-family homes; they look for more affordable offers, despite the low interest rates on mortgages and the opportunity of a lower down payment. Europe still remains in the limelight of traders and investors. Today we’ll see the results of the ECB’s 3-year auction repos. The sums close to the previous LTRO levels are seen as the most favourable for the markets. High figures will reflect the need for serious refinancing in Europe, and low ones will generate fears that the situation won’t change much in the long run and that the banks will remain highly dependent on the goodwill of the markets.

GBP/USD

The British pound managed to rise to 1.59 during yesterday’s trading, as we promised. Today, it is already trading above the 200-day moving average, which is actually the middle level of the year...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/29022012-0931-markets-see-positive-everywhere

1/03/2012 Is EUR becoming the carry-trade funding currency?

EUR/USD

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The data on the ECB’s direct loans proved adverse for the common currency and eventually generated demand for the dollar. It is quite an interesting result as the figures turned out to be close to the middle of the predicted values. Three-year loans totaled 530 billion euro. However, the euro failed to make any gains on the news. On the other hand, the peripheral bond yields began to decline straight away, thus indicating that the fears for the fate of these countries subsided. Judging by the influence such loans produce on the currency, they can be definitely attributed to quantitative easing, which makes borrowings in the currency cheaper. In the end, it should trigger off demand for risky assets and support lending. But at the initial stage, we are most likely to see the sales of the euro as the currency with lowered rates. Looking back to December, after the publication of the first 3-year LTRO the euro held to the same level for a few days at and then began to decline. It must be noted that then the euro sales were accompanied by the growth in stock markets, in contrast to what we had observed earlier. By the way, is it possible to say that with Draghi’s getting into office and the unfolding debt crisis in Europe the euro will become the funding currency? It all depends on how long it will take Europe to handle its current issues. So far treatment deals only with the symptoms while the disease itself remains unaffected and is progressing here and there.

GBP/USD

The data on the UK lending proved really surprising. Net Consumer Credit figures, published on Wednesday, came well above the expected values and proved to be the best over the long term...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/01032012-1046-eur-becoming-carry-trade-funding-currency

2/03/2012 ISDA report helps the banking sector, but renders no support to risk demand

EUR/USD

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Yesterday’s market events can be well packed into two stories. The first one concerns the ISDA’s (International Swaps and Derivatives Association) conclusion that the swap for private Greek debt holders is not a credit event and therefore will not trigger CDS. This news has supported equity markets, especially the banking sector, which feels somewhat mystically feared at the word "default". The other story is about rather unimpressive data on the economy. That’s all in relation to expectations, of course. If earlier the U.S. unemployment claims totaling 351 thousand gave rise to the most optimistic sentiments in the markets, now these figures don’t seem to be enough. Again too optimistic market expectations concerning the economy are somewhat alarming. In a week, on Friday, markets will see data on the US labour market. In general, economists expect the employment increase to go above 200,000. Such monthly rates of job creation have been observed only in the best of times. Now the state of affairs is not that perfect, so it would be better if the markets moderated their optimism. U.S. consumer spending rose by 0.3% in January, which is lower than the forecasted 0.5%. The manufacturing ISM figure hasn’t met the expectations, having fallen from 54.1to 52.4. It is still the phase of growth, but of a more moderate one. The markets however expected acceleration. The same trend has been also seen in the report on durable goods orders. The economy gained momentum in October-December, having built up ample reserves, so now it may slow down for a while, and though not being at risk of recession (yet) it is unlikely to show the same impressive acceleration as in winter. The single currency is falling, which goes along with the model we’ve observed earlier: the ECB’s loans cause weakness of the euro. The EUR/USD is now close to 1.33 and two days ago tried to break above 1.35.

GBP/USD

The British pound is trying hard to resist the across-the-board strengthening of the dollar. At the same time the pound is gradually crawling up and feels all the more freely above 1.59, which is also the level of the 200-day moving average...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/02032012-0950-isda-report-helps-banking-sector-renders-no-support-

5/03/2012 Monday’s demand for risk remains weak

EUR/USD

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On Friday the euro dropped below 1.32 on the sales of technology stocks. During the Asian session the stocks were recouping the losses suffered on Friday's falling of U.S. stock markets, while the euro/dollar remained almost unchanged - just below 1.32. If the pattern we saw in December repeats itself, the single currency may fall into decline for a week or two. The fact is that the "soft money", issued by the ECB, is primarily directed to ease crediting conditions, which, in its turn, leads to lower euro borrowing rates. But after all, it positively affects the economy and spurs inflation, which is sure to support the single currency in the near future. However, that’s all about the future, and now it is important to see the clear signs of the European economic recovery. In this connection, today’s PMI report on services is of interest. The index has cooled the markets’ ardour, having fallen down to 48,8 against 50,4 in January and shown the preliminary data revised down to 49,4. As we see, February’s final reading confirmed the activity reduction. At the same time, business and consumer sentiment indicators are turned upwards, which promises further improvement in the coming months. Thus, if no extreme scenarios unfold, the eurozone economy will show a better performance in the near future. In case this improvement turns impressive and involves not only Germany and France, but also the periphery, investors will probably turn away from the bond sales in the region’s peripheral countries. Time will tell. But for now we warn you against going too far with these expectations.

GBP/USD

It looks as though traders had decided that the British pound has climbed too high and too fast. On Friday and during the Asian session on Monday the sterling suffered a big sale, having dropped to 1.5820...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/05032012-1049-monday’s-demand-risk-remains-weak

6/03/2012 Euro’s holding at 1.32 despite the reduced risk demand

EUR/USD

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The euro gained almost no momentum yesterday. Some factors offset other ones and, as a result, EUR/USD remained at 1.32. Yesterday markets saw a batch of PMI figures. Interestingly enough, statistics have again confirmed the old observation that recovery of the U.S. real economy happens 3-6 months earlier than that of the European one. Thus February’s PMI for the euro area was unexpectedly revised down to 48.8 against the pre-estimate of 49.4. The most depressing thing about this is that a month earlier the service sector displayed growth and the index figure made 50.4. In other words, in January the service sector was intensifying its activity yet, but already in February the situation changed for the worse and the sector’s activity was swiftly fading away. In contrast, ISM’s PMI data for U.S. reflected the increase in the service sector growth. The indicator rose to 57.3 from the previous 56.8. Such strong data generally support the demand for risk in stock markets and risk-sensitive currencies. However, it was different this time. Markets didn’t manage to recover from the sales triggered by lowering of China’s targeted growth. We consider it to be an exaggerated reaction to the expectations. The facts themselves may prove completely different. But the market is still pretty heavy after 2 1/2 months of the persistent rally. On the other hand, heavy sales need a good reason, for instance, a weak report on labour markets this Friday. Until then the sideways trend is likely to dominate.

GBP/USD

The British pound had managed to recover by the end of the day and rose to 1.5850 during Asian session. As we mentioned earlier when commenting on the UK Services PMI data, the statistics are too good to let the sterling fall...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/06032012-0953-euro%E2%80%99s-holding-132-despite-reduced-risk-demand

7/03/2012 Markets fall on ongoing concerns around Greece, but the euro doesn’t look worse than its counterparts

EUR/USD

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Tuesday proved to be a hard day for stock markets. Frankly speaking, it came as the worst one since the beginning of the year. Some commentators attribute such dynamics to the higher probability of Greece’s default on its debt. It’s no secret that international institutions are evaluating the expense at which this deadly scenario may unfold. Institute of International Finance yesterday mouthed its assessment of default in Greece, forecasting possible losses at $1 trillion. The Dutch right-wing party held its own research which showed that the bailout of the troubled countries may eventually cost 2.4 trillion. With stakes being so high, the market players’ desire to give up breaking even is quite natural at the moment. This is what Dutch Freedom Party leader advocates. With such talks around, markets keep rather skeptical about Greece’s deal to get a sufficient number of claims. For now we know only about the participation of large holders, accounting for 20%of the claims. It is still far from 66% required to successfully close the deal. Meanwhile, the market is kept in suspense and volatility is gaining momentum. In our case, the rising volatility, preceded by a continuous rally, marks the market’s tendency to decline. However, we will hardly see any shift in the currencies before facts come out. The end of this week may become really crucial for the further movement in the markets.

GBP/USD

The sterling reveals its dependence on the stock market sentiments. The day, which came for stock markets as the worst one since the beginning of the year, proved to be equally bad for GBP/USD and GBP/JPY...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/07032012-1000-markets-fall-ongoing-concerns-around-greece-euro-doe

8/03/2012 Big day for markets and, more so, for the euro

EUR/USD

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After Tuesday's fears and profit-taking in risky assets, the euro is gradually coming round. And though the day promises to be eventful, stock markets are trading positive. As a result, EUR/USD rose from the lows below 1.31 and is now trading at 1.3170. Today the ECB will hold a regular meeting on the monetary policy. However, the markets will want to pay more attention to Draghi’s press-conference, where he will probably lay his own assessment of the second LTRO auction and speak on the further plans and views of the Bank. For all its importance, the ECB’s meeting won’t probably come as the most risky event of the day. The fact is that later on Thursday or early on Friday markets will see data on private sector investor participation in the Greek debt swap. Remember that for the deal to close successfully the participation rate of all creditors have to be over 66%. However, even this won’t be enough. Even if the deal will be regarded as done, 90% of all money should be involved to reach the required level of "participation". It is rumored that 14% of the creditors are not obligated to participate, and if they take the opportunity, it may eventually ruin the whole deal. However, today’s agenda brings us good news as well. ADP Non-Farm Employment Change in February came in at 216K, which allows us to expect the Non-Farm Payrolls reach the 235K level. The figure is above the average market forecasts and may partly explain the moderate positive, currently dominating in the markets.

GBP/USD

Just like the euro, the sterling is gradually recovering from the weak start of the week. The Cable is now trading at 1.5760 against the 1.57 low, hit on Wednesday night. Today the Bank of England will announce its decision on Interest Rate...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/07032012-0956-big-day-markets-and-more-so-euro

9/03/2012 Greek deal is done and markets wait for payrolls

EUR/USD

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Thursday proved to be quite a favourable day for the markets. Tuesday’s losses in the stock markets were recouped, and the single currency climbed pretty much higher. EUR/USD is trading near 1.3250 now. Most likely, it will stick to this level until the release of data on the US employment. The results of the private investor participation in the debt swap were postponed to Friday morning. The good news is that the 66% threshold has been crossed, which, actually, was already evident from the leaks yesterday. With the collective action clauses applied, the level of participation in the swap amounted to 95.7%. Such relatively good news allows us to speak about the successful closing of the hardest and most nerve-racking deal, which took six months to be clinched. However, the market reaction to this long-awaited news was not very strong, having come just with a few sales of the single currency. The analogy with what we saw after the summits inevitably comes to mind. The euro is supported on expectations, and invariably depreciated on facts. Something of the kind may happen this time as well. Yet the main motion will most probably fall on the US publication of non-farm payrolls. Remember that the markets are expecting the employment growth of 209,000. After ADP’s data release (the 216K growth in the private sector) we assumed that the official figures would indicate the 235K increase or so. However, yesterday’s data on unemployment claims force to be more cautious. Let’s see. We're not going to change our expectations, suggesting strong data, growth in the stock markets and also higher demand for risk. But in the coming months the statistics may prove much weaker.

GBP/USD

As expected by most market participants, the Bank of England did not change anything in its policy, keeping the rate at 0.5% and the size of the QE programme at 325bln. However, that did not prevent the sterling bulls from taking GBP/USD above 1.58...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/09032012-1022-greek-deal-done-and-markets-wait-payrolls

12/03/2012 Good news does not always excite the market growth

EUR/USD

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EUR/USD has been falling since Friday and has lost almost two big figures over this time. The single currency is now worth $1.3080, which is a four-week low. Against our expectations the market did not wait for the publication of statistics on the US employment to start selling risky assets, including the euro. As a result, at the time the non-farm payrolls were released, the euro was already trading as high as 1.3125. The labour market statistics has come in almost as good as expected, showing the 227K increase in the number of jobs (we predicted 235K, while the general market forecast was 206K). Moreover, it can’t but be noticed that almost all sectors can boast improvement now. Employment in manufacturing has been steadily growing for three consecutive months, having added 31K in February after 28K in December and 52K in January. Private sector employment has been averaging out at above 200K over the last six months and grew by 227K in February. The unemployment rate remains at 8.3%, however the disappointing data of January, when the index went down only due to the participation rate reduction, have been a little bit smoothed away. This figure made 63.9% in February against 63.7% in January and 64.2% a year ago. These positive data make the Fed’s extension of its QE programme less possible. But despite the obvious positive data context such expectations triggered the decline in stock markets and reduced the demand for risk. Turning to today, Europeans are expected to back another aid tranche for Greece, which will help the country to avoid a disorderly default. This is also good news, but over recently it’s been too often the case that the market has fallen on the positive news. Technical analysts assume that the common currency will shortly drop below 1.29 on the rising bearish sentiment. However, there is a feeling that the market will be allowed some rest after a strong movement on Friday.

GBP/USD

Friday was an eventful day not only for the U.S. and Europe. Britain also brought us a batch of important news. However, it didn’t boost any optimism in the market. Industrial production did not surpass the expectations, having lost 0.4% against the previous month and 3.8% against the previous year...

Read full review: http://globegain.com/analytics/globe-gain-daily-review/12032012-1117-good-news-does-not-always-excite-market-growth