Posts tagged ‘forex’

February 8, 2012

Optimism Mixed With Cautious Trading As The Greek Situation Remains Uncertain


Optimism mixed with uncertainty in the market, where we can see the euro is fluctuating within narrow levels; however, European stocks were able to record gains and now European markets depends on any improvement in the Greek-debt talks with creditors and also as the Greek Premier meets the leaders of the Greek political parties, discussing the terms required by international lenders to obtain the second bailout funds.

Time is running out and now markets are very focused on the Greek financial situation, where despite the fact that debt-talks extended for a long period of time, the situation is getting more complicated as the wheel of time keeps on turning and now Greek officials must reach an internal agreement among the ruling parties and must also reach an external agreement with international lenders and the private sector.

The Greek Prime Minister is to meet with the leaders of the Greek political parties today, negotiating the terms and conditions of the second bailout package required by the International Monetary Fund, the European Union and the European Central Bank in order for Greece to be eligible to get the financial aid needed so Greece can avert a financial disaster in March.

Political leaders must approve an additional 1.5% cut of the total gross domestic product suggested by the Greek Prime Minister, Lucas Papademos, who attempts to meet the budget targets and reduce the highest debt-to-GDP ratio in the euro zone to 120% by 2020.

Moreover, the sentiment is still highly uncertain as markets are still waiting for the results of the Greek debt-talks with the private sector over the percentage haircuts and the coupon rate to be paid on the new 30-year bonds to be issued in exchange for the existing Greek debt holding, where according to a person familiar to the matter, the private sector is prepared to accept 3.6% coupon rate on the new bonds, while other reports mentioned that the European national central banks will be involved along with the European Central Bank and the cuts on Greek debt could reach 70% so far.

On the other hand, Greece is still negotiating the terms of the second bailout deal with the international lenders, where the second bailout package which was approved in July and worth 130 billion euros is still suspended as lenders demand the Greek government to sign up to measures ranging from a cut in the minimum wage, lower pensions and immediate layoffs for 15,000 state employees.

Moreover, Germany and Switzerland released some important fundamentals today, adding more pressures on the sentiment to remain mixed, where the Swiss unemployment climbed, yet less than expected which added some positivity to the market; however, Germany released the trade balance figures, which showed that the trade surplus narrowed sharply due to the sharp drop in exports.

Furthermore, German sold 3.29 billion euros of 5-year bonds on an average yield of 0.91%, up slightly from 0.90%, while bid-to-cover ratio dropped to 1.8 according to the Bundesbank; however, the sentiment remained unchanged as the bond sale wasn’t disappointing and came in line with expectations.

As of 06:51 EST, the German DAX index was 0.61% or 41.22 points higher, trading currently around 6795.25 points, led by the financial sector, which added 1.52%. However, the utilities sector shed the most today as the sector lost 0.21%.

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February 3, 2012

Eyes Turn To The US Jobs Data

The euro fell after China released worse than expected Non-Manufacturing PMI figures during the Asian session. After the German Chancellor’s visit to China, Chinese Premier said that China is considering a greater involvement in the EFSF and ESF channels. A successful bond auction from Spain helped the euro after Spanish bond yields fell below 5%. Against the greenback, the single currency fell to 1.3085 and later it rebounded to 1.3186. Versus the Swiss franc, the single currency edged higher today to 1.2060 after the Swiss National Bank Chairman said that the central bank is ready to act in order to defend the cap of 1.20 francs to the euro.

The US dollar appears softer today as the market is expecting the US Non Farm Payrolls data. Investors expect data to show that the US economy created 150 thousand jobs in January down from the previous month’s 200K. The unemployment rate is expected to remain unchanged at 8.5%. Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee yesterday and his dovish tone weighed on the greenback. He said that the economy has shown some signs of improvement but the pace still remains frustrating slow adding more on speculation for a third round of quantitative easing. Versus the Japanese yen, the dollar is still hovering above key levels falling as low as 76.04 and with the US jobs data due later today concerns for an intervention by the Bank of Japan are heightened.

The Australian dollar dropped against the greenback today after poor data from Australia’s largest trade partner, China. Chinese non manufacturing PMI dipped by more than expected in January weighing on demand for riskier assets. The pair rose to 1.0671 from 1.0756 traded yesterday.

Oil prices fell sharply to 95.40 dollars a barrel from 97.95, a decline of 2.6%. Gold edged higher to 1761.00 dollars an ounce from 1741.10. Silver also edged higher to 33.38 dollars an ounce from 33.45.

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February 3, 2012

No Greek Debt-Swap Agreement To Be Reached This Week, Eyes To Track Jobs Report And Services Data

Another week has passed without seeing an agreement between Greece and private sector bondholders over the size of losses to be bared by creditors and interest on the new loan.

Athens is struggling to reach a debt-swap deal, raising concerns the debt-mired nations may face default as early as in March when 14.5 billion euros of debt matures.

A report by Bloomberg on Wednesday said Greece and its creditors may reach an agreement with a loss of 70% for a lower borrowing cost of 3.6% instead of 4.25% on 30-year bills, where, in return, a rebound in Greek growth would make the pay to bondholders higher as a compensation for accepting a loss in net present value terms by an estimated 0.5 to 3 percentage points.

Josef Ackermann, chairman of a banking group in negotiations with Greece, said on Thursday a deal with private sector creditors may take place “in the next few days.”

However, it seems that even if a deal is reached, this will not be the end of trouble or a serious step toward solving the Greek debt agony as it will continue its trip of repaying debt over the coming years while cutting spending and raising taxes further to become eligible for receiving a second bailout worth 130 billion euros.

Greek Prime Minister Lucas Papademos is currently looking for support from political leaders to launch further austerity and reforms needed to convince international lenders to give Greece a second bailout announced in October.

With no agreement reached so far, the euro is heading for a weekly loss versus the green currency this week after rising the previous two weeks.

Today, leaders of AAA-rated nations Germany, Netherlands, Luxembourg, and Finland will meet in Berlin to tackle debt-related issues.

Regarding fundamentals from Europe, after the release of upbeat manufacturing data from major economies this week, eyes will track the progress in the services when Germany, euro area, U.K. and U.S. release services data.

Services data from China released today showed that the expansion pace eased to in January to 52.9 compared with the prior reading of 56.0.

Yet, the main highlight of the day will be the awaited non-farm payrolls report from the U.S. due at 13:30 GMT. The change in non-farm payrolls is predicted to retreat to 140,000 in January from 200,000 in December, while unemployment will linger at 8.5%

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