New York Session – April 28, 2010 4:53 PM
April 28, 2010
The EUR continued to gyrate wildly in NY trading as European leaders met in Berlin to hammer out the details of an aid package for Greece. Early comments from Euro-area officials suggested an agreement may be near, prompting a short-squeeze higher in EUR/USD from around 1.3200 to a high near 1.3260. Subsequent headlines indicated that no deal had been reached, but that negotiations were continuing, sending EUR/USD back down to around 1.3180. Then news hit that S&P had downgraded Spain’s sovereign debt rating one notch to AA, sending EUR/USD plunging to a new low for the current decline, just below 1.3120. And that was all before noon. Full text »
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Greek Contagion Fears – CNBC
April 28, 2010
Europe’s growing debt crisis putting more pressure on policy makers to expand a bailout package beyond Greece, with CNBC’s Carolin Schober; Matt Hougan, Index Universe; and Boris Schlossberg, GFT Forex.
Sterling Can’t Get Ahead in Currency Trading
April 28, 2010
Forex trading with GBP/USD
The sterling can’t seem to get ahead in currency trading on the FX market. Even though the FTSE 100 is doing well right now, the pound remains down in forex trading. Indeed, the euro is doing better, in spite of continued concerns over euro zone members’ debts.
And, debt and political concerns are weighing on the sterling besides, reports Boris Schlossberg in FX360:
Meanwhile fears over a hung Parliament continue to dog sterling with the pair tumbling below 1.5200 in London morning trade. A report in the UK Telegraph suggested that it may take 10 days to seat a government in case of split vote and that idea appears to be rattling traders in the City as concerns mount that political turmoil could create a vacuum of leadership as UK struggles with fiscal problems of its own.
See Also
- Looking for Forex Trading Trends
Currency trading on the FX market
Europe Trembles as Greek Contagion Fears Spread
April 28, 2010
Euro zone looks for direction
Exposure to Greek debt — and Portuguese debt (which could be the next crisis) — is harming European banks today. Indeed, stocks in Europe are lower as banks pull down indices, and cause fear with regard to exposure to these debt problems.
Germany remains intractable, blocking attempts at a Greek bailout. Even with IMF money in the mix, Germany is not satisfied with Greek austerity measures, and is holding up the process.
Interestingly, this uncertainty is not harming the euro over much today. The euro is gaining against the U.S. dollar, supported by gold and oil prices, which are also higher today. So, while European stock markets may be down, the euro is nonetheless making a good showing in forex trading.
See Also
- Euro in Forex Trading
Currency trading on the FX market
London Session – April 28, 2010 5:56 AM
April 28, 2010
On May 19th Greece is obliged to repay EUR 8.5 bln of maturing debt. Altogether its May funding need is around EUR 10 bln and with Germany dragging its feet there is still no guarantee that the EU will provide the loan that was promised some weeks ago. The IMF is reportedly preparing to make good some of the shortfall and increase the size of the loan that it had previously promised. Meanwhile the German government is reportedly trying to raise funds in a more politically acceptable way by pressuring existing German holders of Greek debt to cough up some of the EUR 8.4 bln that Germany is compelled to lend Greece as part of its EU obligation. Standing between the German government and its cheque book is the May 9 regional election in North Rhine Westphalia. While the election in NRW is not being fought on the subject of Greece, the issue gives an added edge to concerns about lack of fiscal manoeuvrability in the region. NRW has had to issue a record EUR 27 bln this year. Over the past 10 years or so the amount of debt per capita has soared. This increase in debt and the possibility that the level of local services will have to be cut to meet fiscal consolidation targets does not sit happily with the notion that German taxpayers may have to make funds available to Greece. The lack of German popular support for a loan for Greece is probably also felt by other tax payers in the region. But as the EU’s largest contributor the German electorate must now realise that if it does not provide funds to Greece the possibility that EMU could collapse comes significantly closer. The markets have responded to this risk by bidding ever higher bond yields in other EMU peripheral countries in addition to Greek. The Portuguese government has been expecting to open a new bond in Q2. Fuelled by this week’s credit downgrade, the yield on Portuguese 10 yr bonds is this morning pushing close to 6%. If yields rise much further Portugal may, like Greece, be in a position where issuance on the open market becomes just too expensive. This would increase the needs for further loans from the EU/IMF. Clearly the need for the EU to staunch contagion is urgent. However, the fundamentals suggest this may be an impossible task. The markets will only be reassured that EMU’s deficit issues can be overcome when the data start improving. However, it could be months, even years before this happens. At the core of the problem is that Greece, Portugal, Spain and Ireland desperately need to improve their competitiveness. But, without the ability to devalue their currencies workers will have to see the relative level of their wages drop instead. The alternative is that Germany stimulates domestic demand to absorb the exports of its EMU neighbours. Returning to NRW, however, there is little appetite for additional spending. If relative wage cuts prove too big for Greece to tolerate (and for other EMU countries struggling under large deficits) and if Germany has no appetite either to boost its domestic demand or send bailout payments, then EMU could be approaching a stalemate situation. Some kind of managed default starting with Greece is probable, an exit from EMU for Greece is a possibility. The alternative is that Germany could remove itself from the system; a move which would almost certainly result in the collapse of EMU. EUR may have a significant falls still in store. Full text »
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Asia Session – April 28, 2010 2:44 AM
April 28, 2010
Downgrades of both Greece and Portugal by the S&P sent a shudder through the markets, sending the Euro to fresh one year lows against the greenback in an almost 25 drop for the currency. The opening of the trade day in Asia saw the EUR/USD hit lows of 1.3143 after Standard and Poors dropped Greece’s debt rating to junk status, also cautioning that future downgrades were sure to come if conditions continue to deteriorate in the troubled nation. The downgrades also sent global equities tumbling, quashing any demand for risk heading into Asia. Japan’s Nikkei 225 shed almost 2.50% over the course of the day. Full text »
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New York Session – April 27, 2010 4:52 PM
April 27, 2010
The bloodletting in the Eurozone periphery continued and Greece remained at the forefront once again. Greek 2-year yields look downright silly and have backed up another 220 basis points to well north of the 15% mark. They are now trading an eye-popping 1455 basis points above the German equivalent. Debt issues in Italy are rearing their ugly head after a six-month bill auction printed a horrible bid/cover of 1.02 – down from 1.56 prior. This is as close as one can get to a failed auction, folks. Portugal is also showing signs of continued strain as the 10-year there backed up another 48 basis points to 5.71%, the highest close since late 2000. Meanwhile, equity markets in the periphery collapsed nearly -5% on average. Full text »
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Risk Aversion Sends Euro Lower in Forex Trading
April 27, 2010
U.S. dollar higher in currency trading
Risk aversion is in full force today, sending the euro lower in forex trading. Indeed, the U.S. dollar is gaining ground as concerns about the economy and the euro zone remain a fixture of the forex trading forecast.
Many are concerned about the euro zone, and what could be next, especially since Germany remains reluctant to help with a Greek bailout. Even though German consumer confidence is on the rise, concerns that Greece could drag down the entire euro zone remain.
Also adding to the uncertainty are signs that China is trying to slow its own economic growth, and concerns about the U.S. economy. Forex traders are interested in what the outcome of the two-day meeting by the Fed will mean for the U.S. economy, and there is some uncertainty in that area that is providing a basis for risk aversion.
See Also
- Looking for Trends in Currency Trading
Forex trading on the currency market
U.S. Dollar Maintains Strength in Forex Trading
April 27, 2010
Currency trading with the U.S. dollar
The U.S. dollar is maintaining strength in forex trading on the currency market today as the Fed heads in for a two-day meeting. While the Fed is not expected to make any dramatic announcements or changes to policy, it is possible that small changes, like those to the discount rate or to start selling assets, could be made.
For now, though, the U.S. dollar is stronger in currency trading on the uncertainty surrounding Greece and the global economy. The Greek situation is far from solved, and China appears to be slowing things down, not ready for the type of growth it has been seeing lately.
It will be interesting to see how long the dollar can maintain its strength; perhaps the troubles with Greece have resulted in permanent doubt with regard to the euro zone.
See Also
- U.S. Dollar in Forex Trading
Currency trading with FX market
London Session – April 27, 2010 5:49 AM
April 27, 2010
‘Between a rock and a hard place’ is an apt description of Chancellor Merkel‘s present position. Andreas Pinkwart, the Deputy Leader of her junior coalition partner the FDP has described the prospect of German loan to Greece as a “slap in the face of German employees”. Hans-Peter Friedrich of the government’s second coalition partner has proposed a solution; namely that Greece could reintroduce “its former national currency, the drachma, at a devalued rate of exchange”. In view of the popular opposition to a loan for Greece, Merkel is attempting to spin the notion of a Greek loan as a measure that would save the EUR. However, insofar as there was plenty of opposition within Germany in approach to EMU in 1999 to ‘less well’ fiscally managed countries being allowed within the system, it seems unlikely that Merkel will win over popular support for a loan to Greece. Given the proximity of the May 9 German regional elections this could be problematic for the German government. It could also be problematic for the cohesion of EMU going forward.
Of the EUR 30 bln in loans that the EU has promised Greece, German is due to provide the largest contribution; around EUR8.4 bl Full text »
