OctaFX.Com - Financial News and Analysis

OctaFX_Farid · June 6, 2012

OctaFx - Euro rises after ECB decision

Euro rises vs dollar after ECB decision; Atlanta Fed president says stimulus may be considered

The euro is rising against the dollar after the European Central Bank left its benchmark lending rate unchanged.

Some economists expected the ECB to cut rates to help ease Europe's debt crisis, but bank President Mario Draghi said it's also up to governments to come up with a solution.

Traders also sold the dollar on rising speculation that the Federal Reserve might launch another round of bond-buying to help the U.S. economy. Atlanta's Fed president said in a speech that monetary actions need to be considered.

Bond buying lowers interest rates, and lower rates can weigh on a currency by reducing the returns investors get from holding it. With a third round of bond-buying mentioned, investors sold dollars.

Jun 06, 2012 16:47

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OctaFX_Farid · June 6, 2012

OctaFX.Com -UK's Cameron, Obama urge action on eurozone crisis

UK's Cameron, Obama agree 'immediate plan' needed to tackle eurozone crisis

LONDON (AP) -- British Prime Minister David Cameron and US President Barack Obama have agreed on the need for immediate action to resolve the eurozone crisis.

Downing Street says the two leaders spoke on the phone late Tuesday ahead of the G20 summit in Mexico later this month, when world leaders will discuss Europe's financial woes.

A spokesman for Cameron said he and Obama agreed on the need for an immediate plan to tackle the crisis, as well as a longer-term strategy to secure a strong single currency.

Cameron is visiting Berlin Thursday for a student conference with Chancellor Angela Merkel and Norwegian Premier Jens Stoltenberg, where the eurozone crisis is likely to be discussed.

Cameron is pressing for eurozone countries to protect their currency with measures including greater fiscal burden-sharing among member countries.

Jun 06, 2012 17:46

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OctaFX_Farid · June 7, 2012

OctaFX.Com -Canadian Dollar Forecast Turns Bullish on USD Weakness

Forex retail trading crowds are now their least short US Dollar (ticker: USDOLLAR) versus the Canadian Dollar since the USDCAD first crossed above the CS$1.00 mark. We unabashedly called for important USDCAD gains as crowds sold into rallies. Yet short positions are down 22 percent since last week while longs have risen 19 percent.

As with other US Dollar pairs, we believe that the Canadian Dollar stands to benefit as the USD itself looks likely to correct lower through short-term trading. (USDCAD losses)].

Jun 07, 2012 14:43

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Edited June 7, 2012 by OctaFX_Farid

OctaFX_Farid · July 6, 2012

OctaFX.Com -Finance chiefs confront Europe's unfinished business

BRUSSELS (Reuters) - Euro zone officials are cautioning against expecting any quick action from the currency bloc's finance ministers when they meet on Monday to sort out the tangle of loose ends and disagreements left by last month's EU debt-crisis summit.

Banking supervision, the use of European Union bailout money, aid to Spain and Cyprus and how to deal with Greece -- together it could take months to finalize, despite pressure from financial markets for clarity on the details.

Leaders from the 17 nations sharing the euro reached a deal in the early hours of last Friday to give the European Central Bank greater oversight of the bloc's banks and to use the euro zone's rescue funds to reduce countries' borrowing costs.

But after going beyond what many diplomats, finance officials and investors had expected, critical elements were left vague. Time-frames may already be slipping and opposition is building in euro zone hardliners the Netherlands and Finland.

"You have a Finnish problem. You have a Dutch problem. You have a German problem too," said one euro zone diplomat, pointing to the reservations of those countries about what was announced at the summit and German Chancellor Angela Merkel's reluctance to help its partners without strict conditions.

"I don't see a package done by Monday. They will work until the end of July or the beginning of August on these things," said the diplomat, who is involved in preparations for the Eurogroup meeting of euro zone finance ministers.

The meeting's crowded agenda may hamper progress. Discussing an aid package for Spain's banks, dealing with a request from Cyprus for emergency help, and whether to ease the conditions of Greece's second bailout are also on the table.

Euro zone leaders have committed to ECB-led supervision for banks, which would then allow the permanent rescue fund - the European Stability Mechanism - to recapitalize banks directly, rather than having to lend to governments.

That is seen as a major concession to Spain, which has requested a bailout of up to 100 billion euros ($125 billion) for its banks, but does not want to see that money added to its national debt and possibly push it towards a sovereign rescue.

Leaders agreed to remove the ESM's preferred creditor status when it lends to Spain, to calm investors who were worried they would not be repaid the money they had already lent.

They also decided that the ESM and the euro zone's temporary bailout fund, the EFSF, can buy euro zone bonds at auction and in the open market to lower borrowing costs, with some conditions attached but without a full program.

POLITICAL PROBLEMS

In their summit statement on June 29, leaders told the Eurogroup of finance minister "to implement these decisions by July 9". That now looks optimistic and delays could test market patience.

Ministers will look at the mechanics of how it will work in practice on Monday, but much depends on the ECB's crucial role as supervisor, which will need to be grounded in European law.

It now falls to the European Commission to propose such legislation, which is not expected until at least September.

"It will take at least until the first half of next year to be implemented," said Douglas Renwick, a director responsible for government credit ratings at Fitch Ratings.

"This could run into political problems. The major banks are often national champions and governments have been quite protective of them in the past. The idea of ceding oversight to a European level is a politically painful step to take."

Despite the obstacles to the broad package outlined by leaders, the range of measures agreed allow some short-term action, and vocal opposition to euro zone bond buying in the Netherlands and Finland is unlikely to ruin those plans.

Finland has said it opposes bond-buying in secondary markets, because it considers such purchases to be ineffective.

In emergency cases, the ESM's treaty allows for decisions to be taken with an 85 percent majority, and the Netherlands and Finland only account for 8 percent combined.

"The ESM discussion is being complicated by politicians talking to their electorates, but I think there is a consensus to move ahead with what was decided at the summit," said another euro zone official, briefed ahead of the Eurogroup.

TOUGH TROIKA

If only things were so straight forward for southern Europe.

Greece's new Finance Minister Yannis Stournaras said on Thursday he had been warned to expect a tough time at the Eurogroup, having acknowledged Athens was off course on its pledges linked to a 130-billion-euro rescue.

Ministers will discuss the findings of the "troika" of the European Union, the European Central Bank and International Monetary Fund from their first mission to Greece since the June 17 election. Another mission is due to return later in July.

Greece's Prime Minister Antonis Samaras wants to ease the terms of the bailout, but that would mean more money for Athens.

"Even if the second program as it stands were fully implemented, it is not clear that market access could resume (in 2015)," said David Mackie, an economist at JP Morgan. "A third program seems likely in any event."

For Spain, ministers are unlikely to sign off formally on an aid package for its banks as they are still awaiting an expert report on the situation, despite expectations of a July 9 deal.

"If the euro zone is to survive it has to be more integrated," said Fitch's Renwick. "Further difficult political concessions will have to be made over the coming years."

Jul 06, 2012 09:35

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OctaFX_Farid · July 6, 2012

OctaFX.Com -US Dollar Inches Higher Ahead of NFPs; Japanese Yen Steady, Gold Lower

High beta currencies and risk-correlated assets have traded slightly lower against the worldâ€™s reserve currency, the US Dollar, ahead of the most important data release this week: the US Nonfarm Payrolls report for June. A significantly disappointing figure in May stoked expectations of a third round of quantitative easing from the Federal Reserve; and even though the Federal Reserve did not deliver on those hopes, as expected, there is speculation that another bombshell could reignite the conversation.

Meanwhile, some discouraging developments out of Europe have stunted any rebound in the Euro after the EURUSD broke out of its Symmetrical Channel to the downside in the wake of yesterdayâ€™s European Central Bank rate decision. As noted earlier this week, the performance of Italian and Spanish bond yields, especially on the shorter-end of the yield curve (in light of the two longer-term refinancing operations (LTRO), yields within the three-year umbrella are the most accurate gauge of funding stresses in the Euro-zone) have disappointed. The Italian 2-year note yield has risen to 3.733% (+10.3-bps) while the Spanish 2-year note yield has risen to 4.838% (+39.7-bps). The Italian 10-year note yield has risen to 6.015% (+6.3-bps) while the Spanish 10-year note yield has risen to 6.936% (+23.8-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:54 GMT

GBP: +0.12%

JPY: +0.05%

CHF: -0.10%

EUR: -0.12%

CAD: -0.14%

AUD:-0.28%

NZD: -0.29%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.05%See More

Jul 06, 2012 10:58

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OctaFX_Farid · July 6, 2012

OctaFX.Com -Stocks, euro slide on worries over U.S. jobs

NEW YORK (Reuters) - Stocks on major exchanges extended their losses on Friday and the euro hit 5-week lows after U.S. jobs data for June came in weaker than expected, fueling concerns that Europe's debt crisis is pushing the world's largest economy into low gear.

Prices of oil and copper fell along with those gold as the dollar surged amid a broad flight from risk.

U.S. and German government bond prices leapt, with investors seeking safe havens in U.S. Treasuries and German bunds.

The Labor Department said U.S. non-farm payrolls expanded by just 80,000 jobs in June, falling short of forecasts. A Reuters poll showed the market expecting a growth of 90,000 jobs.

The data raised pressure on the Federal Reserve to do more to boost the economy, and imperiled President Barack Obama's chances of reelection in November.

The 80,000 jobs added in June was "a poor number and a very political number and it will not sit well with the market," said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank in the Northwest in Portland, Oregon.

"There is no question that the QE3 conversation becomes very alive in the coming days and weeks," he said, referring to a third round of quantitative easing since 2008 that markets were expecting from the Fed. The first two rounds of QE involved large-scale Treasuries buying, aimed at lowering long-term interest rates.

Futures traders added to bets that the Fed will keep short-term interest rates near zero until the end of 2014.

Fed fund futures, tied to the overnight lending rate between banks, ticked up after the jobs report, signaling traders see the Fed first hiking rates in the fourth quarter of 2014, either at its October or its December meeting of that year.

The Dow Jones industrial average (^DJI) was down 126.32 points, or 0.98 percent, at 12,770.35. The Standard & Poor's 500 Index (^GSPC) was down 13.36 points, or 0.98 percent, at 1,354.22. The Nasdaq Composite Index (^IXIC) was down 29.03 points, or 0.98 percent, at 2,947.09.

European shares fell further after the jobs data (.FTEU3), down nearly 0.8 percent on the day, having been 0.2 percent lower beforehand. World stocks <.MIWD00000PUS> fell 1 percent.

The euro extended losses to fall to a fresh five-week low against the dollar, sliding nearly 0.5 percent to $1.2332 after falling as low as $1.2317 earlier.

Monetary policy loosening by a trio of major central banks failed to impress investors on Friday, pushing Spanish borrowing costs back up to unsustainable levels reached before last week's EU summit took measures designed to ease pressure on them.

China, the euro zone and Britain all loosened monetary policy on Thursday, signaling growing alarm about the world economy. But to little avail.

The 19-commodity Thomson Reuters-Jefferies CRB index was headed for its sharpest loss in a week as oil and copper prices fell about 2 percent each.

Gold slid more than 1 percent in choppy trade as investors turned to the perceived safety of the dollar. The spot price of gold, which tracks trades in bullion, was at $1,588.19 from $1,604.33 at Thursday's close.

U.S. Treasuries' benchmark 10-year note yields were at 1.5559 percent, their lowest levels in four days. Safe haven German Bund futures hit a session high.

Jul 06, 2012 12:47

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OctaFX_Farid · July 7, 2012

OctaFx -Japanese Yen To Appreciate Further As BoJ Maintains Current Policy

Fundamental Forecast for Japanese Yen: Bullish

The Japanese Yen continued to appreciate against its U.S. counterparts as positive real interest rates in Japan increases the appeal of the low-yielding currency, and we may see the USDJPY track lower in the week ahead should the Bank of Japan preserve its current policy in July. Indeed, the BoJ is widely expected to uphold its zero interest rate policy, and thereâ€™s speculation that the central bank will continue to carry out its current asset purchase program as the board raises its outlook for the region.

Indeed, the BoJ raise its fundamental assessment of all the nine regions for the first time since October 2009 while presenting the quarterly Sakura Report and it seems as though the central bank will stick to its wait-and-see approach as economic activity starts picking up. Although Governor Masaaki Shirakawa maintained his pledge to purse â€˜powerful monetary easing,â€™ it seems as though the central bank is becoming more upbeat towards the economy as the recent developments coming out of the worldâ€™s third-largest economy raises the prospects for future growth. Meanwhile, the Nikkei newspaper said that the BoJ may scale back on its 6-month operation and expand its shorter-term programs, but the central bank may see scope to inject additional liquidity into the system as the ongoing turmoil in Europe dampens the outlook for the world economy. BoJ Deputy Governor Hirohide Yamaguchi held a cautious tone while speaking in Tokyo earlier this week and said that excessive gains in the local currency would dampen private sector activity, and we may see the central bank try to talk down the Yen as it lowers the scope for an export-led recovery.

As the USDJPY threatens the ascending channel carried over from June, a close below the 20-Day SMA (79.56) would instill a bearish outlook for the pair, and the dollar-yen may continue to give back the rebound from 77.65 as the relative strength index fails to maintain the upward trend from the previous month. However, we may see the dollar-yen face sideways price action ahead of the rate decision as market participants weigh the outlook for monetary policy, and the outcome of the rate decision should generate a clearer picture for the USDJPY amid the mixed views surrounding the BoJ

Jul 07, 2012 02:02

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OctaFX_Farid · July 7, 2012

OctaFX.Com -British Pound Looks to FOMC Minutes, EU FinMin Summit for Direction

Fundamental Forecast for British Pound: Neutral

The British Pound remains sensitive to risk sentiment trends, with GBPUSD showing a firm correlation with the MSCI World Stock Index. In the aftermath of last weekâ€™s disappointing US jobs report and underwhelming stimulus efforts from the ECB and the BOE, this puts the spotlight on minutes from Juneâ€™s FOMC outing amid hopes the Fed will deliver some relief. Although Ben Bernanke and company opted not to introduce QE3 last month, traders will be keen to gauge the degree to which such an option entered into the conversation to guide expectations for a possible expansion of the balance sheet to be unveiled in the coming months.

On balance, the utility of another QE program seems highly suspect. Indeed, with US Treasury yields already so low that after adjusting for inflation, real rates are in negative territory out to the 10-year maturity, it seems unlikely that a further push lower will materially encourage those not borrowing to do so. The Fed is surely not oblivious to the limitations of more QE, but it is equally sensitive to the fact that a strong signal against stimulus may trigger pandemonium across financial markets. That means the door to further easing is likely to be kept open, at least rhetorically. With that in mind, language perceived as increasing the likelihood of added accommodation is likely to boost risk appetite and with it the Pound. Needless to say, the inverse scenario is likewise the case.

Besides investorsâ€™ yearning for looser monetary conditions, the Eurozone debt crisis is set to return to the forefront as the currency blocâ€™s finance ministers convene for a meeting on Monday. The sit-down is expected see officials begin implementation of Juneâ€™s EU leadersâ€™ summit framework. While little is likely to be achieved on longer-term issues like joint bank governance and the expansion of EFSF/ESM bailout fund powers, the Spanish bank rescue is likely to figure prominently into the proceedings.

Details of the effort are expected to be ratified at the sit-down. The British Pound continues to be a beneficiary of regional haven flows at times of rising concern about the Euro area, meaning an outcome perceived as disappointing by investors may boost the UK currency.

Jul 07, 2012 07:10

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OctaFX_Farid · July 10, 2012

OctaFX.ComSpanish deal lifts shares, euro stays weak

LONDON (Reuters) - European shares inched up on Tuesday after the region's finance ministers made limited progress on measures to help embattled Spain, but the euro and commodities fell as signs of a sharp slowdown in China fuelled anxiety about the global economy.

The FTSE Eurofirst (.FTEU3) index of top European shares edged up 0.6 percent to 1036.40, after the euro area finance chiefs agreed a deal which will release 30 billion euros of bailout funds for Spain's troubled lenders by the end of July.

The euro zone ministers also decided to grant Spain an extra year until 2014 to reach its deficit reduction targets but made no apparent progress on how the bloc's new rescue fund, the ESM, will be used to help lower Madrid's elevated borrowing costs.

The euro fell 0.3 percent to $1.2280, slipping back in the direction of a two-year low of $1.2225 hit on Monday.

The euro's struggles saw the dollar index (.DXY), which measures the greenback against a basket of major currencies, climb 0.1 percent at 83.219, near a one-month high.

"With the (euro zone) finance ministers' meeting out of the way without proving to be a source of inspiration for risk assets, the focus of the market now turns to the German constitutional court," said Chris Weston, an institutional dealer with IG Markets.

The German court is due to give its preliminary ruling on complaints against the European Stability Mechanism (ESM) and the euro zone's fiscal compact, which could ultimately lead to a further implementation delay.

Spanish 10-year bond yields eased about 14 basis points on news of the deal to just under the crucial seven percent level widely seen as unsustainable.

The euro finance chiefs plan to reconvene in Brussels on July 20 to finalize the agreement, having first obtained the approval of their governments or parliaments.

"I think we have a long ways to go before we reach the stage at which policymakers will be ready to act, particularly as it relates to potential bond purchases in the secondary market," said Todd Elmer, currency strategist for Citi.

CHINA WORRIES

Meanwhile the world's second largest economy China sharply curtailed its levels of imports in June in further evidence that Europe's three-year debt crisis is dragging down economic activity around the world.

Demand for Chinese goods in June was also below its usual pace in part because the U.S. economy has also not fully recovered, a top Chinese customs official said.

Annual import growth was 6.3 percent in June, far short of the 12.7 percent forecast by economists and the 12.7 percent achieved in May. China's crude oil imports for June plunged to their lowest levels of the year from a record high in May.

The lackluster trade numbers came a day after data showed inflation in China eased further in June, giving room to the central bank to loosen its monetary policy to stimulate growth without stoking upward price pressures.

This is a busy week for Chinese economic data releases which culminates on Friday with second-quarter gross domestic product figures, which are expected to show the lowest growth in at least three years.

The latest batch of numbers sent share markets lower across Asia but left the MSCI world equity index <.MIWD00000PUS> largely unchanged at 309.50 after three days of losses.

Brent crude oil was down 1.7 percent at $98.60 a barrel after the data with worries over supply disruptions also easing as a labor strike in Norway's oil industry ended.

Gold prices edged down as the nervousness about global economic growth saw investors turn towards the dollar for safety.

Spot gold dipped $1.50 to $1,585.15 an ounce while the U.S. gold futures contract for August delivery edged down 0.2 percent to $1,585.30.

"The market is being a little pessimistic and cautious about the global economy, and investors are choosing the dollar as the top safety haven," said Li Ning, an analyst at Shanghai CIFCO Futures.

Jul 10, 2012 07:27

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OctaFX_Farid · July 10, 2012

OctaFX.Com -Euro Approaches 2-Year Low on French, Italian Production Concern

The euro declined to within 0.4 percent of its lowest level in two years versus the dollar as industrial production shrank in France and was forecast to fall in Italy as Europe's debt crisis undermined growth.

Europe's 17-nation currency weakened most against the yen among its 16 major peers after European Union Economic and Monetary Affairs Commissioner Olli Rehn said Spain will soon have to take additional measures soon to meet budget targets. The dollar strengthened versus most of its most traded counterparts as Asian stocks declined. Australia and New Zealand's currencies dropped after data showed growth in exports and imports slowed in China.

"The euro is going to stay quite weak, particularly against the U.S. dollar and the yen," said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation's biggest lender. "The euro zone is still in recession and it's probably getting even deeper."

The euro lost 0.1 percent to $1.2297 at 8:15 a.m. London time after sliding to as low as $1.2251 yesterday, the weakest since July 2010. The shared currency fell 0.3 percent to 97.62 yen. It touched 97.43 yesterday, the least since June 5.

French output fell 1.9 percent from a month earlier, Insee, the Paris-based statistics office, said today. April's production increase was revised down to 1.4 percent. Economists had forecast a decline of 1 percent in May, according to the median estimate of 21 forecasts in a Bloomberg News survey.

Jul 10, 2012 07:35

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OctaFX_Farid · July 10, 2012

OctaFX.Com -EU talks up Spanish banks package, markets skeptical

BRUSSELS (Reuters) - Euro zone ministers struggled to reassure financial markets on Tuesday that an aid package for Spain they outlined overnight will help stabilize the currency bloc - a task made all the harder by a German legal challenge to its crisis-fighting tools.

The ministers agreed early on Tuesday to grant Madrid an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings. They also set the parameters of an aid package for Spain's ailing banks.

The decisions were aimed at preventing the currency area's fourth largest economy, mired in a worsening recession, from needing a full state bailout which would stretch the limits of Europe's rescue fund and plunge it deeper into a debt crisis.

"There's no emergency here, there's a clear path towards stabilization," Luxembourg Finance Minister Luc Frieden said of the measures agreed for Spain. "The markets have to realize that the money is there, more money than is necessary."

But markets were disappointed the meeting did not offer more. The euro initially traded near a two-year trough against the dollar and hit a five-week low versus the yen, with sentiment edgy as the focus shifted to a German court hearing.

Germany's top court also will pick up the issue on Tuesday about whether Europe's new bailout fund and budget rules are compatible with national law in a process influencing not just how to tackle the euro zone crisis, but how much deeper European integration can go.

The hearing into complaints about the fund, the European Stability Mechanism (ESM), and fiscal pact may indicate how long the court will keep Europe on tenterhooks.

Anything more than a few weeks would mean a serious delay to implementing the ESM, which has already been postponed from July 1, and raise serious doubts about whether Europe will really get the extra firepower it needs to combat the crisis.

"A considerable postponement of the ESM (bailout fund) which was foreseen for July this year could cause considerable further uncertainty on markets beyond Germany and a considerable loss of trust in the euro zone's ability to make necessary decisions in an appropriate timeframe," German Finance Minister Wolfgang Schaeuble told the court/

At their meeting overnight, euro zone finance ministers did not agree a final figure for aid to ailing Spanish lenders, weighed down by bad debts due to a housing crash and recession, but the EU has set a maximum of 100 billion euros ($123 billion) and some 30 billion euros would be available by the end of July if there was an urgent need.

A final loan agreement will be signed on or around July 20, Eurogroup chairman Jean-Claude Juncker told a news conference.

Frieden, arriving for Tuesday's meeting of finance ministers from the broader 27-member European Union, said the 100 billion euros available to Spanish banks was much more than they needed.

In one key decision watched by investors, ministers agreed overnight that once a single European banking supervisor is set up next year, Spanish banks could be directly recapitalized from the euro zone rescue fund without requiring a state guarantee.

That fulfils an EU summit mandate to try to break a so-called "doom loop" of mutual dependency between weak banks and over indebted sovereigns, but represented a climbdown for hardline north European creditor countries.

"It is a very, very positive agreement," Spanish Economy Minister Luis de Guindos said on arrival for Tuesday's meeting.

KEY APPOINTMENTS

In a nine-hour marathon meeting ministers of the 17-nation euro zone also settled a series of long delayed appointments.

But they made no apparent progress on activating the bloc's rescue funds to intervene in bond markets to bring down the spiraling borrowing costs of Spain and Italy, which threaten to drive them out of the market.

The ministers reappointed Juncker as their chairman for a further term of up to 2-1/2 years, though Europe's longest-serving government leader said he intended to step down from the position at the end of this year or early in 2013.

They nominated another Luxembourger, inflation hawk Yves Mersch, to the vacant position on the European Central Bank's six-member executive board, and picked German Klaus Regling to head their permanent bailout fund, the European Stability Mechanism, due to come into force this month.

Regling had already set up and run the temporary European Financial Stability Facility which has funded rescues for Greece, Ireland and Portugal.

The Eurogroup ministers were tasked with fleshing out a bare-bones agreement reached by EU leaders at a summit last month on establishing a European banking supervisor and using the bloc's rescue funds to stabilize bond markets.

But differences persisted between north European countries such as Finland and the Netherlands and southern states led by Italy and Spain.

On Monday, ECB President Mario Draghi endured at times hostile questioning in the European Parliament, notably from German, Dutch and Finnish lawmakers concerned at the prospect of European bank bailouts using taxpayers' money.

Tuesday's meeting will formally ease a deficit reduction goal that has forced Madrid to make punishing cuts that are exacerbating a recession.

SLIPPAGE

Spanish and Italian borrowing costs eased on Tuesday, with Spain's 10-year bond dipping back below the critical 7 percent level.

Spain's de Guindos spelled out to the euro zone ministers on Monday his government's plan for a package of up to 30 billion euros over several years through spending cuts and tax hikes that are due to be announced this Wednesday.

A source close to the Spanish government said 10 billion euros of cuts would come this year and that the measures would include a hike in VAT sales tax, reduced social security payments, reduced unemployment benefits and changes to pensions calculations.

The European Commission proposed in return easing Madrid's deficit goal for this year to 6.3 percent of economic output, 4.5 percent for 2013 and 2.8 percent for 2014.

European Economic and Monetary Affairs Commissioner Olli Rehn said Spain was expected to take additional savings measures very soon to ensure it meets its new targets.

The new targets may still prove hard to reach, according to a draft recommendation from European partners, loosening Spain's goals and demanding the country be subjected to three-monthly checks.

The figures highlighted Spain's dramatic fiscal slippage due to a worsening recession. Madrid was originally meant to cut its budget shortfall to 4.4 percent this year. Prime Minister Mariano Rajoy unilaterally changed the target to 5.8 percent in March before eventually accepting an agreed goal of 5.3 percent.

Ministers sought to project confidence in Spain.

"We are confident that Spain is (doing) and will do all that is necessary to overcome this crisis," said Dutch Finance Minister Jan Kees de Jager.

Jul 10, 2012 09:31

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OctaFX_Farid · July 12, 2012

OctaFX.Com -Factory output drags on euro zone's economy

BRUSSELS (Reuters) - Euro zone factories unexpectedly stepped up production in May, but output fell in France and the Netherlands in a further sign that the bloc's sovereign debt crisis is also hurting its stronger economies.

Industrial production in the 17 countries sharing the euro rose 0.6 percent in May from April, the EU's statistics office Eurostat said on Thursday, beating expectations of economists polled by Reuters, who had forecast no growth in the month.

But Eurostat revised downward the reading for April to a 1.1 percent drop from a 0.8 percent decrease, the deepest fall so far this year, highlighting the crushing effect that the 2-1/2 year debt crisis has had on consumer and corporate demand.

"May's increase does not alter our view that the sector will continue to act as a drag on overall economic growth," said Ben May, a economist at Capital Economics in London.

"With the weakening business surveys pointing to more rapid rates of decline, we would not be surprised if production fell again in June," he said, forecasting a contraction in second quarter gross domestic product in the euro zone.

A fall in energy production in May for the euro zone as a whole appeared to explain the modest reading as output rose for capital goods, such as machinery to make other products.

Industrial output fell 2.1 percent in France in May, a drop second only to Slovenia's 3.2 percent slide.

Production also fell in the Netherlands, where GDP is expected to shrink 0.9 percent this year, according to the European Commission and making it the worst performing economy in the euro zone's wealthy, northern core.

"Modest annual declines in production in Germany, the Netherlands and Finland suggest that all is not well in the core countries," said Martin van Vliet at ING, adding that with no growth in industrial output in June, the sector's performance will likely knock at least a 0.1 percentage point off GDP.

FRENCH JOB LOSSES

Led by France, EU leaders agreed at a summit last month to inject 120 billion euros ($145 billion) into the European economy to counterbalance public sector layoffs and cuts in spending to bring budget deficits down to sustainable levels.

But with the euro zone crisis also weakening business confidence in China, the United States and other major economies, that plan may not be enough, especially when only 60 billion euros will be available quickly.

In another attempt to revive the economy, the European Central Bank cut interest rates to a record low of 0.75 percent this month, making it cheaper for the euro zone's hard-pressed households and firms to borrow.

The outlook is poor for France in particular, after French carmaker PSA Peugeot Citroen announced on Thursday 8,000 job cuts and the closure of an assembly plant as it struggles with mounting losses.

Germany, Europe's largest economy, has shown the most resilience to the debt crisis and the International Monetary Fund expects it to grow 1 percent this year, better than the stagnation most economists see for the euro zone as a whole.

But while German factories increased production by 1.5 percent in May, it was still not enough to compensate for a 2 percent fall in April. Italy painted a similar picture, rising 0.8 percent in May after also falling 2 percent in April.

"German exports should climb again in the coming months, as we do not expect global demand to slump. That said, the German upswing has lost momentum amid the crisis in the euro zone," Ulrike Rondorf, an economist at Commerzbank, wrote in a note to clients last month on the German export outlook.

Ireland, which the euro zone is eager to hold up as a success story after Dublin took a bailout in 2010, notched up its third consecutive month of solid output gains, with industrial production rising 1.4 percent. ($1 = 0.8164 euros)

Jul 12, 2012 09:18

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OctaFX_Farid · July 12, 2012

OctaFX.Com -Japanese Yen Strength Persists; EURUSD Consolidates

Australian labor market data was a major disappointment in the overnight, showing that nearly all of the jobs gained in May were wiped out in June (save 0.8K). Australia, as a proxy to China, has been putting out weaker than expected data once again, raising emerging market growth concerns. In light of recent Chinese data, which has showed significantly weaker domestic demand in the worldâ€™s most important economy, the Peopleâ€™s Bank of China has cut its key rate twice since the first week of June. Scope for further rate cuts, not only from the Peopleâ€™s Bank of China but from the Reserve Bank of Australia as well, will be revealed tomorrow when the Chinese second quarter GDP report is released.

More importantly, however, is that the US Dollar is surging in the wake of the Federal Reserveâ€™s June 20 to 21 meeting Minutes yesterday. While itâ€™s evident that policymakers are concerned about the direction of the US economy, any further easing will be on the sidelines as long as the recovery muddles along at its current rate. One needs to look no further than commodities and highly-correlated currencies to

appreciate the US Dollarâ€™s strength: AUDUSD and NZDUSD are both down over 1% thus far today; NYMEX WTI Crude Oil has fallen 1.13%; spot Gold is down 0.91% and spot Silver is down 1.78%; and COMEX Copper Click here to See More

Jul 12, 2012 10:55

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OctaFX_Farid · July 17, 2012

OctaFX.Com -Australian Dollar Gained as RBA Reports Stronger Economic Growth, Headwinds Exist

THE TAKEWAY: Minutes from July third meeting reports Australian economic strength > GDP growth is expected to continue at moderate pace while inflation figures suggest easing prices and substantial risk of spillover from European financial crisis exists > Australian Dollar gained

The Australian Dollar gained versus the U.S. Dollar after the Reserve Bank of Australia released their minutes from the July third meeting. Overall, RBA officials noted that the economy had been growing at a stronger than previously estimated rate since mid 2011 as gross domestic product registered at 4.3% over the first three months in 2012. Furthermore, the recent CPI data suggests that inflation appears to have moderated, decreasing to 1.6 percent in March 2012, year over year, from 3.1 percent in December 2011, year over year. Officials also said holding borrowing rates at 3.50% allows for â€œmore domestic growth.â€

Moreover, it was noted that there still remains a substantial risk of spillover from the European financial crisis, however recent developments from the European summit helped to boost market sentiment for the time being.

Officials also noted that Chinaâ€™s economy slowed at a slower rate than initially indicated and that the outlook remains uncertain.

Markets likely interpreted the data to mean that further rate cuts may not be on the horizon thus providing support for the higher yielding Aussie currency.

AUDUSD, 5 Minute Chart

Jul 17, 2012 03:25

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OctaFX_Farid · July 17, 2012

OctaFX.Com -Canadian Dollar Strengthens as Bank of Canada Keeps Rate at 1.00%

THE TAKEAWAY: CAD Bank of Canada Rate Decision > Overnight Interest Rate Unchanged at 1.00% > USDCAD BEARISH

The Bank of Canada kept its main refinancing rate on hold at 1.00% today, as expected, while similarly leaving its Bank Rate at 1.25% and the deposit rate at 0.75%. As the Bank of Canada noted in its policy statement, the main reasons for keeping the main rate on hold have more due to with exogenous factors and less to do with the Canadian growth picture itself.

Governor Mark Carney said that â€œthe United States continues at a gradual but somewhat slower pace, developments in Europe point to a renewed contraction. In China and other emerging economies, the deceleration in growth has been greater than anticipated, reflecting past policy tightening and weaker external demand.â€ The main headwind to confidence and growth, the Euro-zone crisis, has led the Bank of Canadaâ€™s â€œbase case projection assumes that the European crisis will continue to be contained, although this assumption is subject to downside risks.â€

However, â€œdomestic factors are expected to support moderate growth in Canada.â€ Governor Carney finds that â€œconsumption and business investment are expected to be the primary drivers of growth.â€ â€œLower commodity prices,â€ influenced by the slowdowns in China, Europe, and the US will hurt â€œincomes and wealth,â€ as well as â€œrecord-high household debt.â€

Presented below without commentary are the Bank of Canadaâ€™s outlook on inflation and growth:

Core inflation is forecast to remain around 2% over the projection horizon as the economy operates near its production potential, growth in labour compensation stays moderate and inflation expectations remain well anchored.

Given the recent drop in gasoline prices and with futures prices suggesting persistently lower oil prices, the Bank expects total CPI inflation to remain noticeably below the 2% target over the coming year before returning to target around mid-2013.

The economy will grow by 2.1% in 2012, 2.3% in 2013 and 2.5% in 2014.

The economy is expected to reach full capacity in the second half of 2013, thus operating with a small amount of slack for somewhat longer than previously anticipated.

Jul 17, 2012 13:20

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OctaFX_Farid · July 18, 2012

OctaFx -Australian Dollar Declined as Chinese Real Estate Data may Provide Support for Softening Economic Conditions

THE TAKEWAY: Chinese real estate prices ease > Data in line with the recent softening in economic conditions > Australian Dollar declines

The Australian Dollar declined in value versus the U.S. Dollar as Chinese real estate prices show signs of economic slowing. From a sample of 70 Chinese cities surveyed, prices for new residential apartments decreased in 57 cities. Moreover, 58 cities also experienced declining prices for existing residential apartments. The data fell in line with recent CPI figures which increased by 2.2 percent in June, the slowest rate of increase in 29 months.

Declining real estate prices might suggest that credit demand may also be slowing. Earlier in July the PBOC cut lending rates in an effort to provide credit-borrowing incentive, offering additional support for a possible flagging credit demand case.

Finally, softening Chinese data could have negative spillover effects to the Australian economy as China is in large demand for Aussie exports. If the Aussie economy experiences a drop in export demand, then markets may likely project a more accommodative RBA monetary stance and thus reduce expectations for rate hikes.

Jul 18, 2012 03:02

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OctaFX_Farid · July 18, 2012

OctaFx -Japanese Yen Strength Persists; EURUSD Consolidates

Risk-aversion is the tone across the board on Wednesday as US equity futures have declined, commodities have sold off, and the Japanese Yen is the top performer. In the wake of this, the Euro is leading losses (though quizzically, the Australian Dollar is the second best performer against the US Dollar on the day) as the German 2-year note yield fell to -0.06%, perhaps one of the best indicators that uncertainty remains high among investors.

Despite yesterdayâ€™s promising results from the Spanish bond auction, Spanish debt is back under pressure which is adding to the Euroâ€™s woes. The Italian 2-year note yield has pulled back to 3.426% (-7.3-bps) while the Spanish 2-year note yield has risen to 4.802% (+21.0-bps). Similarly, the Italian 10-year note yield has dropped to 5.973% (-3.9-bps) while the Spanish 10-year note yield has risen to 6.767% (+5.1-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:55 GMT

JPY: +0.13%

AUD: -0.09%

CAD: -0.14%

GBP: -0.32%

CHF:-0.48%

NZD: -0.49%

EUR: -0.50%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.19%(-0.48% past 5-days) READ MORE

Jul 18, 2012 10:59

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OctaFX_Farid · July 18, 2012

OctaFX.Com -Dollar rises as Bernanke gives no hint of stimulus

Dollar rises against the euro as Fed Chairman Ben Bernanke gives no hint of imminent stimulus

NEW YORK (AP) -- The dollar is rising against the euro after Federal Reserve Chairman Ben Bernanke gave no indication that the Fed was about to step in again to help the U.S. economy.

In his second day of testimony before Congress, Bernanke said Wednesday economic growth remains weak and that the Fed will contemplate additional action if unemployment stays high.

But he offered no hints that the Fed would launch another round of bond purchases. The Fed has already launched two rounds of bond purchases, most recently in August 2010. Those programs push interest rates lower and can weaken the dollar.

The euro fell to $1.2269 in afternoon trading Wednesday from $1.2289 late Tuesday. The British pound fell to $1.5650 from $1.5647.

Jul 18, 2012 17:01

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Edited July 18, 2012 by OctaFX_Farid

OctaFX_Farid · July 20, 2012

OctaFX.Com -Euro vs. Dollar: Who's the Ugliest One of All?

The euro may be winning the unpopularity contest in the markets at the moment, but the dollar is close behind, according to David Bloom, head of foreign exchange strategy at HSBC.

He described the euro (EUR), which has continued its medium-term fall against the dollar this year after rallying slightly in February and June, as "the ugliest of all" - but maintained the U.S. dollar is far from beautiful.

The Eurodollar is also becoming less effective as a benchmark as investors move away from both currencies, Bloom argued.

"Investors are abandoning the euro and the dollar. We've been focusing on the Eurodollar as the bellwether but if you look at the dollar against other currencies like the Australian dollar or the rand, it's actually weakening," he told CNBC's "Squawk Box Europe" Friday.

"You've got the ugliest of all, which is the euro, but the dollar is starting to look quite ugly as well. The Eurodollar as a benchmark isn't working - people are selling the U.S. dollar now too because we're heading towards elections and the fiscal cliff."

"We're stuck between Europe and the U.S. QE 3, 4, 5 - it's like the Rocky movies!" he said, referring to a third, fourth or even fifth round of quantitative easing.

He is far from the only currency expert to warn against the euro. In the absence of any headline-grabbing meetings or summits in the euro zone this week, markets' attention has turned elsewhere - but risks remain (click here for a slideshow on the world's most indebted nations).

"We still have plenty of event risk up ahead in the euro zone - the German constitutional court for starters - and the chance of a full-fledged (troika) program in Spain," Geoffrey Yu, currency strategist at UBS, told CNBC.

"The euro is being considered more as a funding currency and people aren't trading much off euro-specific news. Looking at our volumes in the past week, people are packing up for the summer.

Politics in the developed world are going to keep their grip on markets and currencies, according to Bloom.

"Politics is the new economics. There's no longer this laissez faire attitude to free markets,"

he said."Look at the Swiss. They have made a political decision to keep manufacturing jobs and its costing them to keep the franc low."

The Swiss National Bank is buying bonds in an effort to keep the Swiss franc (CHF) at a level which will not put companies off investing in jobs in the country.

New safe havens are emerging from the mire, with Nordic currencies like the Swedish krona (SEK), which recently hit a 10 year high against the euro, performing well.

"We're trying to find beauty in this world of ugly. Sweden has turned the corner. It's the rose amongst the thorns," Bloom said.

"The market has switched on to this change already, but we think that it's right to continue buying it."

There are some who believe that the krona has already come too far and now is the time to sell, including analysts at Nomura, who issued a sell note on the currency earlier this week.

The Australian dollar (Exchange:euraud=) has also strengthened, but is more vulnerable than most global currencies to any slowdown in China because of the Australian economy's dependence on commodities.

"A lot of clients are finding the Aussie difficult to sell right now," Yu said.

"If the money does flow in Australia's direction (from China), it'll be hard to fight. If clients want a commodity-linked currency, the Aussie seems the best place to go."

Jul 20, 2012 09:14

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OctaFX_Farid · July 20, 2012

OctaFx -ECB's Coeure warns against betting on euro collapse

MEXICO CITY (Reuters) - The euro zone political commitment to the euro should not be underestimated, European Central Bank Executive Board member Benoit Coeure said on Friday in a warning to those doubting the single currency's survival.

In a speech in Mexico City, Coeure said there was a lack of understanding about the euro zone's approach to tackling the debt crisis and that he disagreed with those who said the bloc did not have the right tools to fix the situation.

"I would caution those who have doubts about the euro, that they underestimate the political commitment to it at their own risk," Coeure said.

"The ambition to provide long-term foundations for EMU in less than a decade is a historical step of great significance," he added.

He added that the euro zone would remain a cornerstone of the international economy and that euro zone leaders had "clearly understood that the time of partial solutions and piecemeal reform is over".

He underscored the bloc's decision to give the ESM permanent bailout fund the ability to capitalize banks directly, a move he described as "crucial to break the vicious circle between banks and sovereigns that is at the heart of the crisis".

In addition he said short-term measures were clearly needed to help growth and soften the blow from austerity.

Jul 20, 2012 15:03

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OctaFX_Farid · July 20, 2012