Analitics
Signs that bearish sentiment may be wearing a bit thin
The Facebook IPO today has temporarily knocked Europe from the headlines as the world’s eyes are focused on the Nasdaq at 1430 GMT/ 0930 ET when Facebook will start trading for the first time. CNBC anchors have been wearing honorary hoodies to mark the occasion so it must be big. I still find it hard to reconcile how FB is worth $140 billion when the site is used by both advertisers and cyber bullies, but perhaps I’m missing the point. The point today is that it is the third largest IPO in the US ever, Zuckerberg will be a gaszillionaire and U2’s Bono is likely to earn $1.5bn from his initial $90 million investment. Facebook might not change the trading world, but it could change the Forbes rich list quite dramatically.
2012-05-18
Precious metals and JPY are back in vogue as potential for QE3 lurks
Today’s price action was interesting as yesterday’s FOMC meeting minutes, which hinted that further quantitative easing may be needed if economic conditions deteriorate, was put to the test on the back of the abysmal U.S. Philadelphia Fed data which came in at -5.8 vs. expectations of 10.0. This sent the buck, which at the time was near its respective highs on the day, reeling as it sparked speculation of QE3. Interestingly, the USD managed to claw back most of its prior gains relative to the European and commodity based currencies, however it continued to weaken versus the JPY as broader ‘risk’ sentiment melted into the close – The Dow Jones Industrial Average finished lower by about -1.24%, S&P 500 fell by -1.51% and U.S. 10-year yield was sunk by -3.59% on the day.
2012-05-17
Central Banks’ to the rescue?
The Bank of England stole the headlines this morning as it delivered its second Inflation Report of the year. Its message was fairly grim: the UK won’t regain its 2007 level of output until 2018. The biggest threat to the UK economy right now according to the bank is the impasse in the Eurozone (something the BOE can’t control).
2012-05-16
More downside risk for the aussie
A meeting overnight between five party leaders in Athens yielded no breakthroughs in forming a new government. Whilst this was no surprise, the clear lack of cooperation between the various parties is very disconcerting and, accordingly, risk sold off following the meeting.
2012-05-15
Greek impasse inspires haven demand
• USD broadly firmer as sentiment deteriorates further as Greek officials struggle to form a unity government. The political impasse is raising speculation of a potential Greek exit from the euro zone which is weighing on risk. Elsewhere, China announced a cut its reserve requirement ratio (RRR) by 50bps to 20% which did little to support risk as the move was seen as a reactive measure to the recent stream of weak data. Global equities and UST yields are broadly lower as traders continue to shift out of risky assets in search of safety and the dollar appears to be the main beneficiary.
2012-05-14
Germany to the rescue?
This is the fifth day without a firm government in place for Greece; if a coalition is not found soon then we could be heading back to the polls, which open up the possibility of a prolonged period of Greek political instability. There was some hope this morning of the Conservatives forming a coalition with the Socialists and other moderate pro-bailout parties that would have a mandate to govern until 2014. This helped to lift the euro from its daily lows; however for a sustained rally in risk we need to get a firm commitment that a “moderate” pro-European government will take the reins of power in Athens. Unless that happens then the markets are likely to remain jittery.
2012-05-11
More QE from the BOE?
The Bank of England concludes its May meeting today. We expect no change in interest rates or in the Bank’s GBP 325 billion of asset purchases, however this decision will be particularly close due to the continued weakness in the UK economic data and deteriorating sovereign situation in the Eurozone.
2012-05-10
Dollar grinds higher as sentiment deteriorates
The dollar continued to grind higher against all of its major counterparts (with the exception of the JPY) as risk sentiment deteriorated further. Another day void of top tier data saw the market focus predominantly on European concerns. Political uncertainty remained high in Greece as Syriza leader Tsipras said that his party was unable to form a government. The mandate will be passed on to the Pasok party tomorrow which is led by former finance minister Venizelos.
2012-05-09
Will EURUSD fall below 1.30?
This is the key question for currency traders right now. The fundamental back-drop looks challenging for the euro. Although the Merkel/ Hollande rift seems overdone to us, Greece is the real problem. The leader of the New Democracy party announced late last night that he had failed to form a coalition government. The baton is now passed to the leader of the radical left wing Syrizia party, which now has three days to form a government. If this fails then another round of elections is on the cards for June. However, these elections could coincide with Greece running out of money, which makes them a much riskier prospect than the elections held last weekend.
2012-05-08
Australia’s trade balance is expected to print in deficit territory again
Price action overnight would suggest the market initially overreacted to the news out of France and Greece, but risk assets are not out of the woods yet. Whilst we did see a broad recovery across the FX and equity markets, there are still lingering risks surrounding the possibility of a Greek default and even Greece exiting the Eurozone. Yet, these are considered only remote possibilities at the moment, and there are also some supportive factors helping to bolster the euro, namely Fitch’s reaffirmation of France’s AAA rating, the lingering possibility of more easing from the Fed and the recognition that anti-austerity isn’t necessarily anti-euro.
2012-05-07
Currency Charts
