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Wednesday update.. WAKE UP Forex market ¡

April 11, 2012 Daily Comment No Comments

For goodness sake forex market cant you do better than that. With stocks falling, bonds going safe haven, the best we could get in forex markets was further small strengthening of the Yen down to lows of USD/JPY 80.65 and EUR/JPY 105.55 . EUR/USD remained stuck around 1.31. All very disappointing, will it be catch up or will equities bounce and bonds behave.

Frankly I hate it when it does that. Leaves you wondering what it will take to get EUR/USD down when all signs were there. While I still have every confidence in EUR/USD 1.20 some time, its hard work. Poor old Japanese authorities they just cannot shrug off the safe haven status that sends their currency stronger.

Anyway back to the exciting markets where in Europe it was really approaching a blood bath ( certainly Italian banks) in equity markets. Italy finished down 5% Spain and France 3% were the worst. On the bond side it was Spain in the firing line again with yields up to 5.98% and that dragged Italy up to 5.66%. All a bit ugly then although US stock markets were off less with the S & P index down 1.7%.

Overnight in Asia stock markets have been down for their 4th session and Europe has opened in negative territory. In forex markets the dollar was a little weaker EUR/USD at 1.3125 and the Australian dollar recovered to 1.03 from lows of 1.0227. The Yen remains at USD/JPY 80.75 and was unable to react to press reports that the BOJ is considering more QE

This morning Spanish bond rates have breached the 6% level although the Euro remains unbothered. We seem to have settled in to a lower range for EUR/USD although having failed to go down on a bad news day it may test the upside at 1,3150 today and 1.32 is possible.

Headlines

Equities.. Italy down 5% was the biggest loser while other markets were down between 1.5% and 3 %
Bonds… The sell-off in peripheral European markets had its usual reverse trade in Germany and the US.. US 10 year yield fell below 2% for the first time in a month
Swiss Franc… The National banks Jordan felt the need to make endless comments on the Swiss Franc. EUR/CHF sits at 1.2016 just above the 1.20 floor and causing concerns for the Swiss. Intervention is continuing a pace.
Spain… Government bonds selling off and the Government pressuring regions over budgets. The strains within Spain are worsening. Regional disquiet is growing. This morning Industrial production down 5.1% in February. The best that can be said is that it was in line with forecasts
UK.. March retail sales out earlier at +3.6% YoY against +2.3% in February. Better news keeps the UK at the best end of European growth prospects. No gains against the Euro yesterday but consolidating at the EUR/GBP 82.50 level.
US… Data continues to be reasonable although the NFP numbers are still causing a fallout. QE rhetoric from Fed officials continues some for, some against.
Japan.. All rumours and reports. BOJ stimulus and possible forex intervention on any further Yen strength.. While risk aversion continues its an up hill struggle to prevent Yen strength

Friday update…. Joke of the year…… Its official Greece hasn’t defaulted yet

March 2, 2012 Daily Comment No Comments

The derivatives body ISDA says a credit event has not occurred in Greece but said with the situation still evolving further questions may be submitted for consideration. Which means they may eventually declare it hopefully ending this charade. In the meantime the Greek manufacturing purchasing managers index (PMI) reached a new low of 37.7 from 41 in January. Staying below 50 ( i.e. Economic contraction) for a record 30 th month shows just how well the austerity is working.The Eurogroup yesterday announced there was still a few conditions that Greece had to meet. Will someone please put them out of their misery.

Anyway enough on Greece after 2 days absence. Eurozone unemployment was not great news either up at 10.7% from January 10.6%. That in itself is bad enough if everyone was about equal . They are not of course Spain at 23.3% Greece over 20% and Austria at the other end at 4%. Notably Italy at 9.2 % hit a record and with inflation above target as we reported yesterday then the news just gets worse. Mostly unemployment over 20% exists in 3rd world countries. That EZ countries are over 20% is testament to the Euro failure and frankly a disgrace.

In markets we had a bit of decoupling for once as stock markets edged back up ( over 1% in Europe) while the euro languished near EUR/USD 1.33. All the way through the recent Euro rally EUR/CHF remained close to 1.2050 just a whisker above the Swiss National Bank floor of 1.20. There was certainly never any appetite for Euros there.

I suspect that the Lack of unity for equity and forex moves is a mere separation rather than divorce. It would be nice though if it continued , good for investors and Euro bears.

In far east markets it was more of the same, stronger equities and US dollar with the Yen nd Euro leading the weakness to lows of 81.72 and 1.3264 all a bit strange but better.

Headlines

Euro.. As Italian and Spanish bond yields sink lower as the LTRO money supports bonds and equities come back stronger the Euro seems to have decoupled from its normal support for now falling to EUR/USD 1.3262
China…According to Dow Jones news service Chinese US$ reserves have fallen to 54% from 65% in the summer. Perhaps they regret it but if true no real smack for the dollar
ISDA… The derivatives body decide Greece has not defaulted so no CDS activation .. Plenty of appeals down the road we assume so its not over yet
Equities.. A strong recovery for stocks in Europe although the US Dow jones failed to sustain the 13,000 level again
Germany… January preliminary Retail sales fall 1.6% against expected +0.5%
Sterling… The British pound very much the star of the show. Staying above US$/GBP 1.59 and rising to EUR/GBP 83.30 and JPY/GBP 130
Russia..an Revolution…. Well not quite but Presidential elections Sunday where Putin remains heavy favourite but has seen a massive internet campaign against him. Already cries of corruption and could be problems in the streets whatever the result. One to watch
Iran …Also elections ….well of sorts
Japan… BOJ chief signals possibility of more QE, core CPI –0.1% YoY against 1% target.. Yen sold again
Gold and Oil ….. recover as equities improve

From here on in we probably need to see softer equities for the current US dollar up move to continue unless of course we have had a new rule book issued which I didn’t spot