Thursday update.. EUR fails again.

  • If we were getting a USD correction I think we can blame the EUR for failing to make the grade once again. After a brief surge to 1.0747 we are back in more familiar territory this morning at 1.0640. For now at any rate it seems that there are still plenty of sellers into any rally and with Greece seemingly slowly unraveling , no wonder maybe.
  • The only surprise from the ECB was a demonstrator who got in to abuse  Mr. Draghi .He looked a bit shocked but maybe he should explain why the ECB needed a new premises when the EU cant manage the funds to save thousands of Libyans drowning in the Mediterranean almost daily. In any event there was no news of note from the meeting or press conference.
  • I still have a hunch that the price action in a number of currency pairs is indicating a possible turn in the USD but we need to get over some pretty big hurdles to confirm it.
  • Risk appetite holds up well and no more so than China’s index up almost 3% overnight. Yes bad news is good as the prospect of more and much more stimulus from Chinese authorities lifts the stock market once again. The worse the economic news the better the markets. Chinese investors may be playing catch up but they seem to be learning fast. What’s more authorities may be happy to watch over it as some compensation for falling property prices.
  • Back to Greece and pessimism seems to be setting in with the odds of a Grexit getting shorter. What economic growth and budget surplus there was seems now to have been squandered by the new Greek government. Their hole is getting bigger caused by their own inaction and while this may all be a big game of bluff one side or the other will have to cross a red line if any kind of  deal is to emerge.
Market summary.
  • Forex..USD bottomed out at EUR/USD 1.0747 and USD/JPY 118.79 although it’s the EUR which seems to suffer the most. AUD ( 7746 ) helped by less expectations of a rate cut and likewise the CAD 1.2324 on better oil are showing more signs of life against the USD. Even GBP/USD 1.4820 shows more inclination than the EUR to sustain a bounce. I’m treating it all very much as a spectator sport at the moment . I hope to see a decent fall in the USD but every failure makes me less convinced.
  • Equities..A bit mixed, it seems you need very bad news to get a real rally. By and large though the equity show rolls on even if it is a very uncomfortable ride for investors.
  • Bonds..German yields continue to tumble with 10YR. down at 0.09 %. as US 10 YR. stays at 189%. Is it any wonder the EUR cant rally maybe. The ECB continues to buy bonds at absolute tops and if it does all go pear shaped they could end up with the bond portfolio from hell.

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