Thread: Daily Reviews of major currencies from Globe Gain Forex Rebates

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

EUR/USD



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...

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09/02/2012 EUR short-covering gains momentum

EUR/USD



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....

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

EUR/USD



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

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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

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

EUR/USD



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

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

EUR/USD



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

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16/02/2012 EU plays Russian roulette with Greece

EUR/USD



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

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

EUR/USD



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

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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

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EUR/USD



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

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