Daily Reviews of major currencies from Globe Gain Forex Rebates

[Globe Gain]

19/04/2012 EUR: a long tightrope walk above the chasm

EUR/USD



For the last 12 trading days positive and negative news on the euro have been perfectly balancing each other, making the euro/dollar fluctuate up and down the 1.31 level. Today the markets are standing still in expectation of the long-term Spanish debt auction. Remember that despite the yield growth the short-term auction results were regarded as positive and brought down the CDS price. The same outcome can be expected this time, as the ECB will hardly let the situation run out of control at such an important moment. After all, if deterioration in Spain reaches the same point as in Greece, it will be simply impossible to find enough money to bail it out. Yet, in Spain support should be primarily given to the private sector, where every one in four is officially unemployed, and the banking sector, which suffers from the consequences of the property bubble blowup. In our opinion, if through the efforts of the ECB and the European leaders the markets function smoothly and the economy resumes growth, the situation may change for the better in the long run. However, the smooth functioning of the market and a single viewpoint are the hardest things to achieve for Europeans. Yet the all-round economic recovery can hardly be expected across the whole region. Along with the labour market where unemployment keeps growing, the construction sector is also suffering a slowdown. The Construction Output tumbled by 7.1% in February and by 12.9% y/y. The worst thing is that the index has been below the current level only twice since 1990. Yet both times it was just a quick drop immediately followed by a recovery. We can only hope that such a recovery will occur this time as well, though the trend gives a real cause for concern.

GBP/USD

The sterling managed to become the hero of the day yesterday. It broke up the 1.60 level in GBP/USD, fell below the 0.82 support level in GBP/EUR and consolidated below it. The pound-bulls are looking to resume the attack today. If they manage to break above 1.6050, they may get support on the triggering stop-orders and approach another local high above the 61 point (1.61, 1.6130, 1.6160)...Read full review

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20/04/2012 North America doesn’t hurry to help Europe

EUR/USD



This morning the Asian markets are under a slightly descending pressure, but the pressure is moderate and therefore doesn’t tell on the currency quotes. Yesterday the euro went through a few disturbing hours, but then investors resumed buying the currency. The disappointment in the high yield, which investors demanded of the Spanish long-term bonds, caused the decline of the euro/dollar from 1.3150 to 1.3070. The sales were also boosted by the rumours that Hollande, who is known to be against the earlier EU arrangements and agreements, is taking the lead in the French presidential race. The leaders of the largest economies of the region, Merkel and Cameron, are furious. That’s really what they haven’t expected. However, already in a few hours the euro grew back to the levels from which it had fallen earlier. Now the pair is quoted at 1.3150. Actually, it may be regarded as a bullish signal as the bears didn’t manage to push the pair down. In the short term the odds may turn in favour of the bulls. However, for a real movement there should be a strong reason, which actually may come up at the G20 and IMF meeting this weekend. Earlier this week we heard that, except for the American Continent, all the other European and Asian countries are ready to allocate money to curb and eventually put an end to the debt crisis. In this respect Europe and Asia depend on the state of exterior affairs. The USA and satellite- Canada can stew in their own juice, enjoying the growth of their local economies and staying immune to the European issues. This is what they think. But it is only partially true. They don’t have immunity, just time to get ready, but Americans are heading for elections, so hardly anything else can bother this country’s politicians now.

GBP/USD

The sterling keeps strengthening its positions, consolidating above 1.60. Now trading is held above 1.6060. Should the events develop positively today, we may see testing of the 1.61 level or even of the higher one...Read full review

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23/04/2012 The euro is under pressure due to the disappointment in the first round of elections in France

EUR/USD



The single currency demonstrated a fairly good growth on Friday due to the stream of positive news out of the region. The German IFO figures moderately exceeded the expectations. The US stock markets also brought in some favourable news, which helped to maintain the demand for risk. Eventually EUR/USD climbed above 1.32 by the end of Friday’s trading, however this week has been opened with the sinking down to 1.3160. Such caution over the common currency is caused by Hollande’s victory in the first round of French elections. Of course, this is not the end, but markets feel nervous as the victory of Sarkozy’s opponent may lead to a complete reconsideration and change of the country’s stand on the so-hardly-reached agreements with the EU. The markets try to estimate the consequences of the possible victory of Hollande, whose standpoint is diametrically opposite to that of Sarkozy’s. Apart from the elections, there is other poor news out of France. The Business Confidence Indicator and the Flash Manufacturing PMI for April have sharply gone down. The latter has fallen from 50.1 straight to 46.4. Data from other countries are expected to come in later, but there is a feeling that they won’t be very reassuring. Probably, the current week won’t be very favourable for the euro and the bounce from 1.30 may prove to be just a short-term gathering in the stops before a trip down. It’s quite possible that bears will test the 1.30 support level soon.

GBP/USD

The British pound climbed very high. On the market optimism and fairly strong data on the local retail sales the currency managed to rewrite the local highs and go up to 1.6147 on Friday. This is the best performance vs. the dollar since the end of October...Read full review

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24/04/2012 Ranks of fiscal compact advocates get thinner

EUR/USD



The single currency was suffering the pressure of negative news for most part of the day yesterday. The morning sentiment dominated the markets all day long: the exchanges reduced their stakes in the risky assets on the concerns that France would change the leader, the Netherlands wouldn’t ratify the fiscal compact treaty and the situation in Australia would change for the worse. All that created a rather unfavourable picture where only safe assets were in demand. As for the fiscal compact, here the things are even in a sadder state. The problem is not only with the Netherlands; France, if ruled by a new leader, may also reject the fiscal compact or insist on the reconsideration of the terms. Moreover, Jens Weidmann, the head of the Bundesbank, also all of a sudden opposed Merkel’s stance on the issue. So, new gaps crop up here and there in the European cohesion. In addition, the data on economic activity leave much to be desired. The Euro-Zone Flash PMI Composite fell from 49.1 down to 47.4. Eventually, this indicator has been below the 50 point for 7 consecutive months. By contrast, services in Germany are gaining momentum. But there isn’t much to hope for - this is not the case when Germany will be able to save the whole region. Most likely, the activity will significantly weaken in the coming months. Today the US New Home Sales figure will be of interest. It is supposed that the indicator will manage to recoup the last month’s decline. The CB Consumer Confidence indicator is on the contrary unlikely to show favourable figures for April. As forecasted, it will come in at 69.9 against the previous figure of 70.2. During Asian trading the euro received support at 1.3120 and is now trading at 1.3170 as a day ago.

GBP/USD

The sterling proved to be stronger than expected. It managed to recoup its recent losses by the middle of the day, upon which the bulls took the situation in hand and brought the pair back above 1.61. Today the trading is held at 1.6130...Read full review

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25/04/2012 Markets are on the tenterhooks waiting for the Fed’s press-conference

EUR/USD



Tonight the Fed will announce the results of the two-day FOMC meeting. The CB is not expected to take any certain measures, this is why the markets will tend to look out for the signs of change in the Committee’s mood. There is much food for thought as a series of strong news on the economy has been followed by a batch of rather poor data. Although the labour market is growing, the rate of job creation has conspicuously decreased. The US consumer sentiment is also retreating from its maximum levels, achieved over the previous months. The Conference Board Consumer Confidence indicator, published yesterday, sank down to 69.2 in April. The March figure was also revised down. Thus, the highest consumer confidence was reported in February. This roughly coincides with the developments in the labour market. The data on the US estate property don’t help to clearly define the situation either. The New Home Sales shrank by 7.1% in March. Meanwhile, the previous figure was revised up (+7.5%), so eventually the released data managed to exceed the expectations. However, statistics on prices leave much to be desired. The housing prices keep falling and this is not a very good signal as more and more people turn out to owe more than they have. Under such circumstances Bernanke will hardly forget to mention about the readiness to further support the economy. Apart from the major FOMC statement, we’re also waiting for the press-conference of the Fed’s head today. This event may lead to strong market volatility. The euro has good potential for movement in either direction as it is close to the local highs at 1.32. Thus, traders either will gather in stops at the top or drive the pair to 1.30 in the direction of the lower boundary of fluctuations for the recent days.

GBP/USD

The British couldn’t hold out longer and gave up the idea of budget consolidation. In March Public Sector Net Borrowing made £15.9 bln against £15.1 bln a year ago...Read full review

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26/04/2012 Bernanke’s speech supports demand for risk

EUR/USD



The Fed didn’t manage to produce any impact on the market situation and FOMC assumed a neutral policy stance. Even changes in the forecasts balanced each other. The growth expectations for this year improved (from 2.6% to 2.7%), while the long-term forecasts, on the contrary, were revised down (for 2013 from 3.0% to 2.9%% and for 2014 from 3.7% to 3.4%). Yet, the number of players believing that 2014 will be the year of an extremely tough monetary policy has increased. In the first minutes after the news release the dollar got momentum for growth, but didn’t manage to consolidate the gains.
At the press-conference Bernanke claimed his readiness for further stimulation of the economy if needed. Such news calmed down the markets and allowed players to focus on corporate reporting. For now 200 out of the S&P 500 companies have given their reports and 150 of them have managed to exceed the expectations. This favourable signal helped the markets to stay positive. The increased demand for risk brought the euro/dollar above the 1.32 level. At the opening of Asian trading today the pair declined slightly, but soon the purchases resumed again. Now the euro/dollar is trading near the three-week highs at 1.3230. It’s quite possible that the pair will grow further and test the 1.33 level soon.
Backstage rumours are now focused on the need to bail out Hungary. Most likely, this country won’t be the only one in need for money this year. So, it’s going to be a hard year for the EU as it will have to help both the Euro-zone periphery and weak countries in the east and centre of Europe. In addition, retail investors have restrained their ardour to buy these countries’ government bonds after the case with Greece.

GBP/USD

The preliminary GDP estimate for Britain shows that the country has moved into recession. After a 0.3% decline in the last quarter of the previous year the economy shrank by another 0.2% in the first quarter of the current one...Read full review

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30/04/2012 The inflation slowdown in the USA gives the Fed room for maneuvering

EUR/USD



Though we cannot talk about the absolutely smooth run of events in the USA yet, one factor definitely speaks in its favour. This is the slowdown of inflation. Such disposition leaves space for the Fed to maneuver in regard to the further QE. Frankly speaking, inflation has never held back from taking decisive measures, yet the pressure on the part of economists has always been high. Let’s turn to the facts. According to the preliminary estimates, in the first quarter the US economy was developing with the annual rate of 2.2%. It is a bit weaker than the expected 2.6%, but not very bad especially when compared with the first quarter of 2011 when this rate made only 0.4%. For more vivid comparison let’s convert it to the method of European data calculation. We’ll get the economic growth at 0.5% in the first quarter against the forecasted rate of +0.6%. But this is just the beginning as the economy started to malfunction only at the end of the quarter, so the worst is still ahead. It’s interesting that the GDP index shouldn’t have come as high as it was expected, i.e. against the forecasted bounce up to 2.3% it grew just by 1.5%. Besides, in the fourth quarter the growth rate totaled 0.9%. With such rates the Fed’s doves can overlook the statements of critics claiming that the soft monetary policy generates inflation risks. Moreover, in contrast to Britain the USA will in no way face stagflation (stagnation of economy against the background of high inflation). Today is the last trading day of April. On the whole, for most part of April the single currency has remained in a slightly upward trend, but still hasn’t managed to recoup the decline of the first four days of the month. EUR/USD is now trading around 1.3250 and may try to test the resistance at 1.33. But as we are entering May, which is likely to bring with it low volumes and slowdown of economic growth in Europe and the decline in employment growth in the USA, it’s hard to believe in success of the euro next month.

GBP/USD

The strength of the British pound keeps surprising. Since morning the sterling has been trading at 1.6280, which is the highest level since last August. The rate looks even more surprising as it has come despite the unfavourable data on the GDP decline in the first quarter...Read full review

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01/05/2012 Is it the weather which stands behind the good start of the year in the States? If true, the affairs are in a bad shape.

EUR/USD



The single currency is still in the upward trend despite a certain decline to its lower boundary during slack trading on Monday. Today the most part of the day promises to be even more sluggish due to holidays in Europe, however it doesn’t deprive us of the opportunity to see the volatile end of trading today. Among yesterday’s statistics we should single out data on the consumer spending of Americans in March, which came in rather bearish despite the better-than-expected personal income growth. In March Americans spent by 0.3% more than in February while earned by 0.4% more. Thus, the conspicuously decreased savings ratio is again on the rebound. It’s not very favourable for the dollar as it may retard growth in the USA, where about 80% of GDP is accounted for by final consumption. Other statistical data are also of interest. The Chicago PMI index showed a strong decline from 62.2 down to 56.2 in April. This is the lowest level since November 2009. Dallas Fed Manufacturing Activity also came in below expectations. From the March level of 10.8 this indicator dived below the zero mark, having fallen down to -3.4. However, all these figures are of rather minor importance in comparison with today’s ISM Manufacturing PMI. This important indicator will either confirm the serious decline in business activity or will refute the signals of secondary indicators. Some attribute the strong data on growth in the USA to very warm weather which gave a sufficient impetus in the first months, but only due to the dynamics of the following ones.

GBP/USD

Yesterday’s rally of the British pound could well go down in history. The thing is that Monday’s trading started with growth of the pound. Actually, that was the 11th day of consecutive growth of the currency vs. the dollar, which had never happened before...Read full review

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02/05/2012 ISM Manufacturing PMI rekindles hope for further recovery in the USA

EUR/USD



How good should be the news to send Dow Jones to its 4-year maximums? Practically, it shouldn’t be very bad after a chain of poor figures. Standing in contrast with a whole series of disappointing news, yesterday’s Manufacturing PMI from ISM managed to set the markets going. In April the index totaled 54.8 against 53.4 a month earlier. Among the components of the index, those, reflecting dynamics of exports and new orders, showed the strongest growth. It is really impressive. The high levels of the commodity price and manufacture sub-indexes are also worth mentioning (61.0 for both). This speaks about the spread of inflationary pressure (it can be rather low, but affect many sectors) and impressive rate of production buildup. What looked absolutely incredible a year ago, this year has become real: the Chinese manufacturing activity declined that very month when the American one grew. Though the markets reacted positively to the upward revision of HSBC Manufacturing PMI from 49.1 to 49.3, the current figures of the index still reflect the decrease in the manufacturing activity as compared to the preceding month. Moreover, a month before this the manufacturing sector suffered even a stronger decline. Then the figure made 48.3. Today, markets will see data on German employment and Final PMIs for European countries separately and together, which promise to be quite interesting. Besides, in the afternoon ADP data on the employment change in the private sector are scheduled to be released. As expected, the April employment figure will be 180K higher than a month ago, when it came in at 209K. This forecast is accounted for by the general tendency of the market to expect the slowdown in the US growth, which is runs counter to yesterday’s strong data on Manufacturing PMI.

GBP/USD

The pound- traders achieved a balance during the thin trading on Tuesday. In their opinion, the sterling looked extremely unsteady at 1.63, but nevertheless the bears couldn’t push the pair down and bring it below 1.62. At present trading is focused around 1.6230...Read full review

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03/05/2012 Bad news from Europe can be trumped only by bad news from the USA

EUR/USD



Not otherwise than to emphasize the advantageous position of the USA over Europe data on the European manufacturing activity proved to be poor. What is especially unpleasant is that these were final data which generally do not differ much from the preliminary estimate, but this is not the case now. The Italian PMI came in at the lowest level in the history, having lost at once 4.1 points from March to April. The April PMI figure for France was revised from 47.3 down to 46.9. The estimate for Germany was cut down to 46.2, the lowest level since July 2009. Such hail of news, coming in at a 5-minute interval, couldn’t but harm the single currency. But that was not the end. The situation was aggravated by poor employment data from German Federal Labour Agency: the unemployment rate increased at once by 19K, which proved to be the sharpest growth since July 2009. That’s right: the PMI and unemployment rates are now pointing to the fact that the current situation can be similar to that period, at least in the degree of deviation from the preceding vector of development. It’s quite possible that having shrunk in the last quarter of 2011, the German economy will show a decline this quarter as well. If true, we will be able to speak about another recession (at least technically). Here we can rely only on the preceding income growth in Germany and on the willingness of its citizens to spend their savings when employment declines. The euro would have kept declining if the ADP hadn’t released unexpectedly disappointing data on employment in the US private sector. After this publication the euro sales stopped for a while and EUR/USD stood still around 1.3121. However, there were few reasons to buy the euro for the dollar, that’s why now trading is conducted at 1.3140. This day also promises to be eventful. The ECB’s decision on the monetary policy and Draghi’s press-conference are high on the agenda. Let’s see what the latter will say in regard to “mild recession” in the Euro-Zone.

GBP/USD

No, Britain doesn’t give in. To be more exact, the PMI data keep pointing to the fairly good state of affairs in the construction sector. The April Construction PMI figure, published on Wednesday, remained high at 55.8 against 56.7...Read full review