Home » Portugal » Recent Articles:

Thursday update…. Fundamentals coming home to roost ?

March 22, 2012 Daily Comment No Comments

It will be clear to anyone who reads my comments that I base much of my views on fundamentals and use a combination of technical analysis and gut feel as a back up. The last 24 hours while hardly seeing huge forex moves has been more about the fundamentals I believe in. Namely concerns over Eurozone and Chinese growth. That’s shown up in data from China to France and has also seen some heavyweight commentators voice negative views on the economics and certain currencies.

This morning we have had a batch of Purchasing Managers Index ( PMI) numbers for China France and Germany weaker than expected. That’s hit the Australian dollar ( China) the AUD 1% lower at 1.0375 and the Euro slipping through yesterdays low of EUR/USD 1.3179 to 1.3160 now.

Certainly in the Eurozone concerns over Spain, voiced by the Citicorp chief economist sit well me me. As I have said before I live in Spain and I can see what’s happening. Portugal is also vulnerable. Like Spain they have a general strike planned but for what purpose. These countries are in recession and many businesses which had barely survived the last 3 years will throw the towel in. Whether this translates to bigger forex moves now we will have to see but at least on economics I feel may views are vindicated.

Its for sure not easy at the moment , very easy to get whipped about certainly in EUR/USD if you follow every move back and forward over or under 100 or 200 day averages. Its been in a range for so long and that requires some discipline to hold on to core positions. Traded well you can improve your average position rate. Even if I am wrong the losses will be smaller and hopefully when and if we see the Euro and Australian dollar a lot lower we make some real money.

Headlines

UK… BOE minutes spooked sterling a bit yesterday before the budget. The budget was according to Fitch credit neutral and therefore currency neutral. GDP forecast raised to 0.8 from 0.7
Spain… Citicorp economist sees Spain at greater risk of default than ever.
PIMCO…Turns bearish on Euro, Australian dollar and Sterling **
Japan… Yen fights back following better than expected trade data ( 33 Billion surplus vs expected 120 Billion deficit) USD/JPY 82.90 and EUR/JPY 109 from over 111. is where the adrenalin junkies should be. the Tankan economic report was also stronger.
China— HSBC March flash PMI 48.1 vs 49.6.. This hurt the Australian dollar
France… March flash Manufacturing PMI 46.6 vs 50.3 forecast
Germany March flash Manufacturing PMI 48.1 vs 51 expected…. Poor French and German data has knocked the Euro this morning.
Equities.. Largely flat although European shares have fallen 1% this morning following the PMI numbers

**According to a report in the Wall street journal PIMCO ( Pacific Investment management) has abandoned its bearish dollar view and is shorting the Euro ( expecting 10 to 15% lower at least) The Australian dollar ( 15% lower) and Sterling ( 5 to 10 %). These guys control billions of dollars worth of investments so not to be sniffed at. This is there view for the rest of the Year ( they call that short term) and not surprisingly I love them.

When I worked in London I gave currency opinion to the biggest UK asset manager. They work on a longer horizon than traders and have huge exposures to manage. They seek out the opinions of respected advisors as well as their own research based un fundamentals. PIMCO does not change its mind at the drop of a hat but worth noting they were very wrong on US treasuries last year.

Super Tuesday update.. Markets may stay on hold until Thursday haircut or Friday Employment data

March 6, 2012 Daily Comment No Comments

Without doubt there are two major issues this week on which many markets may rise or fall.

Firstly we have to have an announcement on Greek private bond holders by Thursday close. This will determine whether Greece’s new bailout package can finally go through. Its a measure of how close things seem to be that no one is counting on investor numbers reaching a level that leaves the debt haircut to go ahead, the worst case scenario forcing a´Default` announcement. This would seem unlikely but nothing would appear certain.

Then we have US Non Farm Payroll and employment data. The last two months have been very positive lifting equities and risk generally. A third set of good numbers could cement the view that the US recovery has more momentum and power the stock indexes higher. The opposite while not necessarily a game changer could just spark more of a correction in those indexes which have enjoyed a very good start to the year.

These two events have potential in tandem to spark a big US dollar move and possibly also the Euro. The same could also be said of the Yen and Australian dollar, both having shown weakness recently. Certainly poor employment data might see those two currencies really take fright.

Overnight equities have been softer but not by much and the US currency a whisker firmer although we still remain in a narrow range. EUR/USD is at 1.3185 having stayed in the 1.3170/1.3240 band yesterday. The Australian dollar which reached AUD/USD 1.0670 overnight has slipped back to 1.0615 with 1.06 a bit of a physiological barrier.

Headlines
US.. ISM non manufacturing 57.3 against 56 expected
US…Factory Orders down 1% against –1.5% expected
ECB.. Another week of no bond purchase makes it 3 in a row. I bet they wish they could sell some before maybe those profits disappear
Portugal…Will not revise deficit targets…It just wont make them…I said that
Asia.. Stock markets off about 1%
Australia… RBA leaves rates unchanged but AUD slips. They noted the slower Chinese growth