The euro is continuing to weaken on speculation European nations will struggle to raise funds after Ireland suffered a five notch credit downgrade.
Ireland’s repositioning just above ‘Junk status’ has sparked renewed concern over the future of other indebted nations in the eurozone. In response, the single currency depreciated against most of its major counterparts including a two week low against the US dollar and Japanese yen, as well a record low against the Swiss franc.
Sentiment is very bearish towards the sixteen nation currency with the prospect of further downgrades looming overhead before the long Christmas break. Whispers in the market point to even France being in the crosshairs of Moody’s et al as the cost to insure French government debt has trebled this year. The abundant credit warnings and increasing speculation over the spirally debt crisis have left the euro looking particularly vulnerable as we head into the new year.
Divisions within the European Central Bank are also not helping the situation. European finance ministers have ‘serious concerns’ that the Irish draft legislation to fix the banking system may threaten the ECB’s ability to run its liquidity operations.
In other news, the aussie dollar continues its run of good fortune as it hits a 25 year peak against the pound and the euro following the Irish downgrade.
Tom Hampton
Analyst – Caxton FX
Monday, 20 December 2010
Wednesday, 1 December 2010
Euro has a momentary bounce
The euro has managed to claw back some of its losses as a three day selling spree lost steam. However, doubts still remain whether the eurozone can contain debt problems.
Rumours that the EU are looking to be more proactive in dealing with Portugal and Spain than they were with Ireland, has sent the single currency back up to $1.3143 and €1.1885 against the US dollar and sterling respectively. The news has also tightened (very slightly) bond premiums in Portugal, Spain and Italy over their German counterparts. An announcement tomorrow from the ECB will help to clear up these rumours, although the 16-nation currency still remains vulnerable to more heavy selling.
Another angle on this could be that the EUR has fallen at such a rate the market has been caught short of euros and investors are taking a ‘breather.’ Expect to see further selling resume after the ECB meeting on Thursday.
More good news this morning about the state of the UK economy, as better than expected Manufacturing PMI data gave the pound a short boost. The index came in at 58 for November, greatly exceeding the market predictions of 54.8. This is a 16 year high for the index. PMI data from the construction and service sectors are due tomorrow, but it would seem that the UK recovery is gaining traction.
Tom Hampton
Analyst – Caxton FX
Rumours that the EU are looking to be more proactive in dealing with Portugal and Spain than they were with Ireland, has sent the single currency back up to $1.3143 and €1.1885 against the US dollar and sterling respectively. The news has also tightened (very slightly) bond premiums in Portugal, Spain and Italy over their German counterparts. An announcement tomorrow from the ECB will help to clear up these rumours, although the 16-nation currency still remains vulnerable to more heavy selling.
Another angle on this could be that the EUR has fallen at such a rate the market has been caught short of euros and investors are taking a ‘breather.’ Expect to see further selling resume after the ECB meeting on Thursday.
More good news this morning about the state of the UK economy, as better than expected Manufacturing PMI data gave the pound a short boost. The index came in at 58 for November, greatly exceeding the market predictions of 54.8. This is a 16 year high for the index. PMI data from the construction and service sectors are due tomorrow, but it would seem that the UK recovery is gaining traction.
Tom Hampton
Analyst – Caxton FX
Tuesday, 30 November 2010
The euro struggles to find a bottom
The euro has fallen across the board again this morning, dropping to an 11-week low against the dollar hitting $1.2972 and enabling the pound to climb up to €1.1956.
The single currency has fallen by over 1% to sit just below the $1.30 level. A lack of confidence in the Irish bailout and growing concerns over the Iberian peninsula have caused the premium investors demand to hold Spanish bonds to soar to a lifetime high over their German counterparts. A lack of confidence is also weighing heavily on Portuguese, Irish and Italian bond yields. The effect is even starting to spread to other financially sound economies by association as Belgium’s spread widens.
Speculation on how far the euro can actually fall ranges from parity against the greenback to $1.25. However, the last two times the EUR/USD rate fell below its “200 day moving average”, the rate sank by 18% and 16% respectively, bringing $1.10 into play.
Data from the eurozone this morning has been flat, with a better than expected result in US consumer confidence later this afternoon, we could see the 16 nation currency fall even further.
Tom Hampton
Analyst – Caxton FX
The single currency has fallen by over 1% to sit just below the $1.30 level. A lack of confidence in the Irish bailout and growing concerns over the Iberian peninsula have caused the premium investors demand to hold Spanish bonds to soar to a lifetime high over their German counterparts. A lack of confidence is also weighing heavily on Portuguese, Irish and Italian bond yields. The effect is even starting to spread to other financially sound economies by association as Belgium’s spread widens.
Speculation on how far the euro can actually fall ranges from parity against the greenback to $1.25. However, the last two times the EUR/USD rate fell below its “200 day moving average”, the rate sank by 18% and 16% respectively, bringing $1.10 into play.
Data from the eurozone this morning has been flat, with a better than expected result in US consumer confidence later this afternoon, we could see the 16 nation currency fall even further.
Tom Hampton
Analyst – Caxton FX
Monday, 29 November 2010
The euro in free fall
The euro has fallen to two month lows against the US dollar and sterling, hitting $1.3066 and €1.1891 respectively.
A confirmed bailout package of €85billion has not managed to sooth the markets fears over the state of the eurozone as a whole. The issue has escalated so far that the single currency has fallen below its 200 day moving average and the next key target is €1.30. Investors expect further losses given the uncertainty surrounding the fiscal outlook of the regions ‘peripheral’ countries. With the state of the economies of countries like Spain and Portugal, it is hard to see light at the end of the tunnel. To put things into perspective, Spain’s economy is twice the size of Portugal, Ireland and Greece combined. A bailout package for the Spaniards would make anything we have seen so far insignificant.
With very little out this week from the UK, all eyes will be on EUR/USD, with the UK currency a mere spectator. Look for any bad news results from the eurozone and Friday’s Non-Farm Employment Change figures. Having heard very little of the results of the South Korean’s and the American’s sea trials over the weekend, an escalation in problems over there will only have a negative effect on the 16 nation currency.
Tom Hampton
Analyst – Caxton FX
A confirmed bailout package of €85billion has not managed to sooth the markets fears over the state of the eurozone as a whole. The issue has escalated so far that the single currency has fallen below its 200 day moving average and the next key target is €1.30. Investors expect further losses given the uncertainty surrounding the fiscal outlook of the regions ‘peripheral’ countries. With the state of the economies of countries like Spain and Portugal, it is hard to see light at the end of the tunnel. To put things into perspective, Spain’s economy is twice the size of Portugal, Ireland and Greece combined. A bailout package for the Spaniards would make anything we have seen so far insignificant.
With very little out this week from the UK, all eyes will be on EUR/USD, with the UK currency a mere spectator. Look for any bad news results from the eurozone and Friday’s Non-Farm Employment Change figures. Having heard very little of the results of the South Korean’s and the American’s sea trials over the weekend, an escalation in problems over there will only have a negative effect on the 16 nation currency.
Tom Hampton
Analyst – Caxton FX
Friday, 26 November 2010
The dollar heads yet higher
Sterling fell to its lowest level for one month against the US dollar, bottoming out at $1.5614. With very little data out today, the pound’s just a spectator to broader market flows into the US currency. Britain’s strong links with the eurozone, which is having another torrid day in the markets, aren’t helping.
The euro’s falling after a report in the FT Deutschland said the majority of eurozone nations and the ECB were urging Portugal to apply for a bailout. Borrowing costs for Europe’s most indebted nations are at a record high as concerns reach fever pitch over several EU member states. The average yield for 10 year bonds from Greece, Ireland, Portugal, Spain and Italy reached 7.56%, its highest level since the inception of the single currency.
The dominating theme in the markets at the moment is one of risk aversion. With South Korea and America flexing their muscles on North Korea’s horizon with a series of sea trials, fears of a full on war are taking their toll on the market. The greenback has soared to a seven week high against the Japanese yen and the euro, hitting Y83.95 and €1.3204 respectively. Until a calmer sentiment descends on the market, we can also expect to see higher yielding currencies taking a step back as they have today.
Have a nice weekend and come on England!
Tom Hampton
Analyst – Caxton FX
The euro’s falling after a report in the FT Deutschland said the majority of eurozone nations and the ECB were urging Portugal to apply for a bailout. Borrowing costs for Europe’s most indebted nations are at a record high as concerns reach fever pitch over several EU member states. The average yield for 10 year bonds from Greece, Ireland, Portugal, Spain and Italy reached 7.56%, its highest level since the inception of the single currency.
The dominating theme in the markets at the moment is one of risk aversion. With South Korea and America flexing their muscles on North Korea’s horizon with a series of sea trials, fears of a full on war are taking their toll on the market. The greenback has soared to a seven week high against the Japanese yen and the euro, hitting Y83.95 and €1.3204 respectively. Until a calmer sentiment descends on the market, we can also expect to see higher yielding currencies taking a step back as they have today.
Have a nice weekend and come on England!
Tom Hampton
Analyst – Caxton FX
Thursday, 25 November 2010
Déjà vu
With a quiet data calendar and little fresh news out the eurozone, today’s trading pattern smells very similar to yesterday. The euro has made up some of its lost ground over lunch, following a disappointing morning.
This morning, the euro traded near a two month low against the US dollar as rising borrowing costs in Spain and Portugal fanned the flames of concern that Europe’s debt issues will worsen. If the single currency has its fourth straight drop against the greenback, it would be its longest losing streak for three months. Reports that capital is leaving the periphery nations has put the 16 nation currency under even further pressure. The recent decline in Spanish bonds has come despite reassurance from the Spanish Deputy Finance Minister that the nations funding for the rest of the year is ‘comfortable.’ The fact that it has even come into question seems to be concern enough for the market.
The euro’s bounce after lunch could well be due to very thin trading volumes today as America loosens its belt in preparation for roast turkey and pumpkin pie. Happy thanks giving!
Tom Hampton
Analyst – Caxton FX
This morning, the euro traded near a two month low against the US dollar as rising borrowing costs in Spain and Portugal fanned the flames of concern that Europe’s debt issues will worsen. If the single currency has its fourth straight drop against the greenback, it would be its longest losing streak for three months. Reports that capital is leaving the periphery nations has put the 16 nation currency under even further pressure. The recent decline in Spanish bonds has come despite reassurance from the Spanish Deputy Finance Minister that the nations funding for the rest of the year is ‘comfortable.’ The fact that it has even come into question seems to be concern enough for the market.
The euro’s bounce after lunch could well be due to very thin trading volumes today as America loosens its belt in preparation for roast turkey and pumpkin pie. Happy thanks giving!
Tom Hampton
Analyst – Caxton FX
Wednesday, 24 November 2010
Euro extends its losses
Although the euro has regained some of the day’s losses, the single currency earlier fell to a two month low against the dollar, extending its losses caused by uncertainty over Ireland’s plans to tackle its debt problems as political unrest deepens. Uncertainties remain over whether the crisis in Ireland will actually be resolved as the IMF and EU try to reach an agreement with a government teetering on the brink of collapse.
Fears of the crisis spreading to other peripheral eurozone nations has reached fever pitch as concerns seem to have skipped the next logical step, Portugal and moved straight to Spain. A default from the Iberian Peninsula would dwarf anything so far as it is the continents fourth largest economy. Peripheral government bond yield spreads over Germany have widened as a result.
Another factor lifting the dollar is of course the unstable nature of relations between North and South Korea. A statement released from north of the border suggested that the two nations are approaching a state of all out war. This has only helped the so called ‘refuge’ currencies as investors look for safety until matters are resolved.
All in all, sterling is not a bad place to have your pennies in at the moment.
Tom Hampton
Analyst – Caxton FX
Fears of the crisis spreading to other peripheral eurozone nations has reached fever pitch as concerns seem to have skipped the next logical step, Portugal and moved straight to Spain. A default from the Iberian Peninsula would dwarf anything so far as it is the continents fourth largest economy. Peripheral government bond yield spreads over Germany have widened as a result.
Another factor lifting the dollar is of course the unstable nature of relations between North and South Korea. A statement released from north of the border suggested that the two nations are approaching a state of all out war. This has only helped the so called ‘refuge’ currencies as investors look for safety until matters are resolved.
All in all, sterling is not a bad place to have your pennies in at the moment.
Tom Hampton
Analyst – Caxton FX
Tuesday, 23 November 2010
This ain’t no currency war!
There has been a definite shift in sentiment towards ‘risk off’ as news that North and South Korea exchanged artillery fire last night, causing the US dollar, Swiss franc, and Japanese yen to appreciate.
The dollar rose against all of its major counterparts, bar the Swissie, as North Korea fired artillery shells into South Korea near the border. As the South Koreans retaliated, demand for refuge currencies increased and higher yielding assets took a knock. The euro, which is already struggling due to the Irish debt crisis and a renewed bout of political turmoil, has fallen about a cent and a half against the greenback (currently trading at a 7-week low). With further concerns about to rear their head over the state of the Greek economy (the government is threatening to shut down in order to save money), problems in Portugal and a tough global fourth quarter in full swing, we don’t envisage a turnaround in this euro downtrend remain for some time yet.
In addition, expect to see more volatile assets such as the aussie, kiwi and rand remain on the back foot as this period of political and economical uncertainty prevail. The Thanksgiving holiday in the US is yet a further reason for investors to place it safe as they head into a long weekend.
Tom Hampton
Analyst – Caxton FX
The dollar rose against all of its major counterparts, bar the Swissie, as North Korea fired artillery shells into South Korea near the border. As the South Koreans retaliated, demand for refuge currencies increased and higher yielding assets took a knock. The euro, which is already struggling due to the Irish debt crisis and a renewed bout of political turmoil, has fallen about a cent and a half against the greenback (currently trading at a 7-week low). With further concerns about to rear their head over the state of the Greek economy (the government is threatening to shut down in order to save money), problems in Portugal and a tough global fourth quarter in full swing, we don’t envisage a turnaround in this euro downtrend remain for some time yet.
In addition, expect to see more volatile assets such as the aussie, kiwi and rand remain on the back foot as this period of political and economical uncertainty prevail. The Thanksgiving holiday in the US is yet a further reason for investors to place it safe as they head into a long weekend.
Tom Hampton
Analyst – Caxton FX
Monday, 22 November 2010
Afternoon euro weakness
On a day with very little economic data, the euro has erased early gains following an initial agreement to rescue Irish banks to prevent wide spread ‘illness’ across the eurozone’s debt markets.
The single currency had reached a one week high against the greenback and ended a four week losing streak against sterling, hitting $1.3786 and £1.1606 respectively. The highs came after EU finance ministers said the deal will create a capital fund for Irish banks and is estimated to be worth about €90billion (rumours are abundant as you’d imagine).
Ireland’s request for a bailout makes it the second euro member to seek rescue from the EU and IMF. Speculation about the financial stability of other member states has led to fears that the single currency is in fact just a bankruptcy machine working its way through the region. This will of course be music to the ears of many euro skeptics (myself included) like the Swede’s whose national referendum stopped Sweden joining the common currency. How the powers that be ever thought so many individual economies could be brought together in harmony is/was ludicrous. Each economic area needs to retain certain elements of monetary policy to ensure the best possible trading conditions for their own economy. This may explain why in the early 2000’s, Germany’s economy was at its most sluggish since world war II, however, Ireland was deserving of the nick name the ‘Celtic Tiger.’ Who is roaring now?
Tom Hampton
Analyst – Caxton FX
The single currency had reached a one week high against the greenback and ended a four week losing streak against sterling, hitting $1.3786 and £1.1606 respectively. The highs came after EU finance ministers said the deal will create a capital fund for Irish banks and is estimated to be worth about €90billion (rumours are abundant as you’d imagine).
Ireland’s request for a bailout makes it the second euro member to seek rescue from the EU and IMF. Speculation about the financial stability of other member states has led to fears that the single currency is in fact just a bankruptcy machine working its way through the region. This will of course be music to the ears of many euro skeptics (myself included) like the Swede’s whose national referendum stopped Sweden joining the common currency. How the powers that be ever thought so many individual economies could be brought together in harmony is/was ludicrous. Each economic area needs to retain certain elements of monetary policy to ensure the best possible trading conditions for their own economy. This may explain why in the early 2000’s, Germany’s economy was at its most sluggish since world war II, however, Ireland was deserving of the nick name the ‘Celtic Tiger.’ Who is roaring now?
Tom Hampton
Analyst – Caxton FX
Friday, 19 November 2010
The ridiculous euro
The euro is once again edging up against most of its major counterparts, recouping earlier losses on expectations that the Irish are near a deal with the IMF and ECB for a bailout package. Against the single currency the pound has fallen back below €1.17 , whilst the euro / dollar rate is holding around $1.3650.
It seems the market is unwilling to let the EU currency deteriorate despite all the problems facing it. Other than some non EU companies and countries making bad foreign investment, it is mindbogglingly frustrating. The structural problems facing the region at the moment start with astronomically high expenditure on social security. All those who go on strike because they refuse to work past the age of 45 are fanning the flames of a defunct banking system that is over-leveraged, governmental budgeting problems and national bankruptcies. Why can the market not see that the euro is a bankruptcy machine taking each nation down one by one? After Ireland comes Portugal, then Spain; bring on Italy next, and even the more securely financed structure of France could well have problems. If it was not for the frugal Germans propping up the continent, this would have happened a long time ago. The sooner these problems are factored into the market the better.
Phew! Now that is off my chest, I am wondering if the market or the euro is the more ridiculous?
Have a good weekend.
Tom Hampton
Analyst – Caxton FX
It seems the market is unwilling to let the EU currency deteriorate despite all the problems facing it. Other than some non EU companies and countries making bad foreign investment, it is mindbogglingly frustrating. The structural problems facing the region at the moment start with astronomically high expenditure on social security. All those who go on strike because they refuse to work past the age of 45 are fanning the flames of a defunct banking system that is over-leveraged, governmental budgeting problems and national bankruptcies. Why can the market not see that the euro is a bankruptcy machine taking each nation down one by one? After Ireland comes Portugal, then Spain; bring on Italy next, and even the more securely financed structure of France could well have problems. If it was not for the frugal Germans propping up the continent, this would have happened a long time ago. The sooner these problems are factored into the market the better.
Phew! Now that is off my chest, I am wondering if the market or the euro is the more ridiculous?
Have a good weekend.
Tom Hampton
Analyst – Caxton FX
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