The main news this morning was that Portugal is to recieve its next €14.6bn tranche of aid under last year's bailout agreement, having passed the Troik's assessment.
The market’s response has been fairly muted but it is definitely relieving news from Portugal.
The Iberian country is clearly next on the market’s ‘hit list’ and this next tranche is essential for eurozone confidence in the short-term. It staves off fears that Portugal is destined to follow the same path as Greece.
Portugal is making the right noises in ruling out the need for further aid but the market is very much in wait and see mode now, the cynics will say they’ve heard it all before.
Ireland has shown that aggressive reforms can actually work and return countries to competitiveness, so there is a precedent to follow there.
The OECD’s research shows that the periphery are actually working hard on their reforms, the problem is it can take a long time for all of the benefits to emerge, time the markets aren’t necessarily willing to grant countries like Portugal.
It will be interesting to see if tomorrow’s 3-year LTRO from the ECB relieves some of the pressure on Portuguese bond yields. Portuguese yields actually increased since mid-December’s LTRO and you’d assume they will be left out in the cold this time, which is a major concern.
Richard Driver
Caxton FX Analyst
Showing posts with label Ireland. Show all posts
Showing posts with label Ireland. Show all posts
Tuesday, 28 February 2012
Monday, 18 April 2011
Peripheral debt issues finally hit the euro...hard.
The euro is being sold off by the bucket load today. German ministers have claimed that Greece is unlikely to make it through the summer without defaulting. Success for the euro-sceptic True Finns party in the Finnish parliamentary elections has created further uncertainty around the recent Portuguese bailout request. Moody’s rating agency has also downgraded Irish debt to junk status today. All this on what was supposed to be a relatively quiet session!
Investors have been spooked by reports from the Greek media that Greece recently told the EU and the IMF that it wanted to restructure its debt. The story was denied by officials in Athens, but the damage had already been done.
Should such an event occur, it would be the first debt restructuring in the EU’s fairly brief history, which in the absence of precedent carries with it very real concerns. If Greece defaults, who would bet against Portugal and Ireland defaulting? Spanish debt has held up fairly well in the wake of the Portuguese bailout request, but contagion to Portugal’s Iberian counterpart remains a constant threat.
BBC business editor Robert Peston’s blog on Friday noted the risks of peripheral defaults to Germany. The German economy is performing robustly at present, but the German banking system is actually quite vulnerable, and Peston’s point about their exposure to peripheral debt is a good one. A debt restructuring would mean a haircut for creditors like German banks, so the German people should be careful about toughening up on its struggling eurozone friends!
As a result of today’s news, the euro has fallen sharply across the board. Against the dollar, the single currency has fallen by nearly 1.5%, and almost 1% against sterling. Asian sovereign buyers have been very willing to buy on euro dips, and have also been particularly resilient to eurozone debt issues in recent months.
We expect euro will find some support in the Asian session, though recouping all of today’s losses will require a serious show of faith.
Richard Driver
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Investors have been spooked by reports from the Greek media that Greece recently told the EU and the IMF that it wanted to restructure its debt. The story was denied by officials in Athens, but the damage had already been done.
Should such an event occur, it would be the first debt restructuring in the EU’s fairly brief history, which in the absence of precedent carries with it very real concerns. If Greece defaults, who would bet against Portugal and Ireland defaulting? Spanish debt has held up fairly well in the wake of the Portuguese bailout request, but contagion to Portugal’s Iberian counterpart remains a constant threat.
BBC business editor Robert Peston’s blog on Friday noted the risks of peripheral defaults to Germany. The German economy is performing robustly at present, but the German banking system is actually quite vulnerable, and Peston’s point about their exposure to peripheral debt is a good one. A debt restructuring would mean a haircut for creditors like German banks, so the German people should be careful about toughening up on its struggling eurozone friends!
As a result of today’s news, the euro has fallen sharply across the board. Against the dollar, the single currency has fallen by nearly 1.5%, and almost 1% against sterling. Asian sovereign buyers have been very willing to buy on euro dips, and have also been particularly resilient to eurozone debt issues in recent months.
We expect euro will find some support in the Asian session, though recouping all of today’s losses will require a serious show of faith.
Richard Driver
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Monday, 14 February 2011
Eurozone cracks begins to show
After England’s demolition (yes I think we can go that far) of Italy at the weekend, the theme continues in the currency markets, with the pound rallying against its euro counterpart, climbing up .70% on the day and briefly touching €1.19.
After a lengthy absence from front page news, the eurozone cracks are finally beginning to re-appear, with a plethora of potential problems hitting the headlines once more.
The lack of news coming recently, coupled with euro strength had more or less duped investors into thinking that they had put the eurozone troubles behind them. This is not the case however, as Ireland and Greece reared their ugly heads with signs that all is not well in their respective camps.
Ireland’s main opposition party, Fine Gael, announced today that they would seek a renegotiation of the international bailout that Ireland received should they be elected on February 25th. Meanwhile Greece, in a sign that they may be struggling to match debt repayments, criticised the IMF and European Union for the stringent terms that were imposed on them.
This comes on the same day that Portugal, (another member of the G.I.P.S.I. family) saw benchmark government debt yields climb to an all time high, above the psychological 7.00% barrier, to 7.37% - a bad sign for the countries borrowing costs. This raises the prospect that the country may yet be forced to appeal for a bailout.
In other news, reports suggested that rescue plans for ailing lender WestLB were under threat, assuring that euro sentiment remained sluggish at best at the beginning of this week.
The main driving force behind the currency markets, EUR/USD, broke below key technical support on this news, and continues to fall with little light at the end of the tunnel in the near term.
A frenetic start then to a busy week – focus has returned to the eurozone with Spanish and Italian bond auctions, and German GDP all still awaited. Meanwhile Britain’s inflation report on Wednesday is looking to overshadow the whole lot as Mervyn King takes the stand.
Edward Knox
Analyst - Caxton FX
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Friday, 7 January 2011
Sterling romps ahead
After a very flat morning, sterling has made significant gains against most of its counterparts following worse-than-expected data from the US.
Despite poor PMI figures earlier in the week, the pound has managed to make up almost four cents against the euro (from €1.1591 on Monday to a high of €1.1970 today) and buck its downward trend against the US dollar.
Following a string of poor results this morning from the eurozone, GBP/EUR remained relatively flat as the market waited for the outcome of the US Non-Farm Payroll. The figure came in some 56,000 below expectation at 103,000. However, the more telling data for the pair may well have been that the unemployment rate fell from 9.7% to 9.4%.
The subdued mornings play suddenly erupted as the Reuters screen froze and refused to give a real number until the market settled down and the computer could catch up. The raging pound then shot up to €1.1969 from just under €1.19 and has spent the past hour yo-yoing up and down before coming to rest around €1.1950. The pound has now risen by almost 5% against the 17-nation currency in only four days.
Although I have waxed lyrical about today’s wild throws of trading, the truth is, as stated in the blogs of the past two days, the single currency is in a dire situation and the market will use any excuse to abuse it.
The poor numbers from across the pond at lunchtime have helped sterling stem its losses against the greenback today. However, this is more than likely to be just a blip. The theme of USD strength is set to continue until the Fed’s second round of QE abates (officially June 2011). Beyond the $600billion injection, it is hard to see exactly what will happen to the dollar, however the likely outcome would be a spell of weakness.
Indeed, JP Morgan has gone so far as to estimate EUR/USD hitting $1.48 by year end. Is this too much of a turnaround? Certainly a turnaround is expected in the latter half of the year as monetary policy in the US stays loose whilst Europe looks too tighten. But surely the debt crisis in the EU is not close enough to a resolution to warrant a move of that level, particularly as the price could drop as low as $1.20.
In other news, well done England on winning their first test series in Australia since 1986. For a good laugh at an Aussie journalist, have a read of this article.
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Despite poor PMI figures earlier in the week, the pound has managed to make up almost four cents against the euro (from €1.1591 on Monday to a high of €1.1970 today) and buck its downward trend against the US dollar.
Following a string of poor results this morning from the eurozone, GBP/EUR remained relatively flat as the market waited for the outcome of the US Non-Farm Payroll. The figure came in some 56,000 below expectation at 103,000. However, the more telling data for the pair may well have been that the unemployment rate fell from 9.7% to 9.4%.
The subdued mornings play suddenly erupted as the Reuters screen froze and refused to give a real number until the market settled down and the computer could catch up. The raging pound then shot up to €1.1969 from just under €1.19 and has spent the past hour yo-yoing up and down before coming to rest around €1.1950. The pound has now risen by almost 5% against the 17-nation currency in only four days.
Although I have waxed lyrical about today’s wild throws of trading, the truth is, as stated in the blogs of the past two days, the single currency is in a dire situation and the market will use any excuse to abuse it.
The poor numbers from across the pond at lunchtime have helped sterling stem its losses against the greenback today. However, this is more than likely to be just a blip. The theme of USD strength is set to continue until the Fed’s second round of QE abates (officially June 2011). Beyond the $600billion injection, it is hard to see exactly what will happen to the dollar, however the likely outcome would be a spell of weakness.
Indeed, JP Morgan has gone so far as to estimate EUR/USD hitting $1.48 by year end. Is this too much of a turnaround? Certainly a turnaround is expected in the latter half of the year as monetary policy in the US stays loose whilst Europe looks too tighten. But surely the debt crisis in the EU is not close enough to a resolution to warrant a move of that level, particularly as the price could drop as low as $1.20.
In other news, well done England on winning their first test series in Australia since 1986. For a good laugh at an Aussie journalist, have a read of this article.
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Wednesday, 5 January 2011
Sterling is merely a spectator as the euro slumps against the US dollar
Despite worse than expected construction data from the UK, sterling has made gains against most of its major counterparts as it tracks the US dollar higher.
Positive employment data from the US and continuing fears about the eurozone debt crisis have sent the greenback higher with the pound hanging on to its coattails. A report showing that US companies created almost three times as many jobs in December than expected helped the US currency make its largest gains in almost three months. USD has recouped all losses made against the yen since new year’s eve and taken it back to pre-Christmas levels against the overinflated Swiss Franc.
Continuing issues in the eurozone will be the general theme for 2011 with a possible break-up of the single currency the most extreme prediction from some analysts (see this piece by Harry Wilson in The Telegraph). While this is unlikely, pressure from the stronger EU nations for a resolution could well lead to a state of greater fiscal union with Germany inevitably picking up the pieces.
Reading ‘Peston’s Picks’ from the BBC, I was interested to see his views on the Ipsos Mori survey published today. The survey outlines that FTSE 350 leaders are more upbeat about the start of 2011 than they were in 2010, despite heavy handed austerity measures. Mr Peston goes on to point out that despite muted optimism in early 2010, no one saw the collapse of Greece and Ireland (although according to this BBC piece his colleague James Robins, the BBC Diplomatic correspondent, did exactly that) . What will 2011 have in store for us?
In other news, further integration of China into the world economy took a leap forward as the World Bank has issued its first bond denominated in the Chinese yuan. The international lender could have plans afoot to make China its third largest stakeholder after the US and Japan.
And finally, pun’s about the state of the single currency reached fever pitch as Estonia has been enveloped into the EU’s economic bosom. Apparently, a cow in Tallinn, Estonia’s capital, offers an excellent exchange rate of one kroon to one euro, fifteen times better the actual exchange rate. Well, where there’s muck there’s brass! (sorry)
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Positive employment data from the US and continuing fears about the eurozone debt crisis have sent the greenback higher with the pound hanging on to its coattails. A report showing that US companies created almost three times as many jobs in December than expected helped the US currency make its largest gains in almost three months. USD has recouped all losses made against the yen since new year’s eve and taken it back to pre-Christmas levels against the overinflated Swiss Franc.
Continuing issues in the eurozone will be the general theme for 2011 with a possible break-up of the single currency the most extreme prediction from some analysts (see this piece by Harry Wilson in The Telegraph). While this is unlikely, pressure from the stronger EU nations for a resolution could well lead to a state of greater fiscal union with Germany inevitably picking up the pieces.
Reading ‘Peston’s Picks’ from the BBC, I was interested to see his views on the Ipsos Mori survey published today. The survey outlines that FTSE 350 leaders are more upbeat about the start of 2011 than they were in 2010, despite heavy handed austerity measures. Mr Peston goes on to point out that despite muted optimism in early 2010, no one saw the collapse of Greece and Ireland (although according to this BBC piece his colleague James Robins, the BBC Diplomatic correspondent, did exactly that) . What will 2011 have in store for us?
In other news, further integration of China into the world economy took a leap forward as the World Bank has issued its first bond denominated in the Chinese yuan. The international lender could have plans afoot to make China its third largest stakeholder after the US and Japan.
And finally, pun’s about the state of the single currency reached fever pitch as Estonia has been enveloped into the EU’s economic bosom. Apparently, a cow in Tallinn, Estonia’s capital, offers an excellent exchange rate of one kroon to one euro, fifteen times better the actual exchange rate. Well, where there’s muck there’s brass! (sorry)
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Tuesday, 21 December 2010
Poor public finance data nudges sterling lower
Sterling took a step lower against the euro today and moved very slightly lower against the US dollar after UK data was released showing unexpectedly high public borrowing figures for November.
The Public Sector Net Borrowing Requirement result has called into question whether the government can meet its deficit-cutting target. The figure came in at almost £23billion in November, up from targets and last year’s figure of £17billion. The data, in conjunction with recent weak retail sales data, has shifted focus onto the state of the UK’s fragile recovery and its ability to grow in Q1 next year.
Despite this momentary blip, focus will undoubtedly return to the state of the EU and its debt crisis. Having had Ireland’s credit rating reduced to that of Trinidad & Tobago, Moody’s has now put Portugal on review for a possible (imminent) downgrade. Expect to see this saga continue throughout 2011.
In other news, the Swiss franc is continuing its bull charge as it smashes through all time highs against all of its major counterparts.
Tom Hampton
Analyst – Caxton FX
The Public Sector Net Borrowing Requirement result has called into question whether the government can meet its deficit-cutting target. The figure came in at almost £23billion in November, up from targets and last year’s figure of £17billion. The data, in conjunction with recent weak retail sales data, has shifted focus onto the state of the UK’s fragile recovery and its ability to grow in Q1 next year.
Despite this momentary blip, focus will undoubtedly return to the state of the EU and its debt crisis. Having had Ireland’s credit rating reduced to that of Trinidad & Tobago, Moody’s has now put Portugal on review for a possible (imminent) downgrade. Expect to see this saga continue throughout 2011.
In other news, the Swiss franc is continuing its bull charge as it smashes through all time highs against all of its major counterparts.
Tom Hampton
Analyst – Caxton FX
Monday, 20 December 2010
Downgrade risk hurts the euro
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
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
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
Monday, 15 November 2010
Sterling slips against the dollar
Sterling is down against a broadly firmer US dollar but remains at a seven week high against the struggling euro, currently trading at $1.6070 and €1.1820 respectively.
The greenback extended its gains from last week as better than expected retail sales data prompted a group of Republican economists to launch a campaign calling for the Fed to reduce its quantitative easing plan. The dollar index (a measure of the dollar’s value in comparison to a basket of currencies) hit a six-week high while the 10-year US treasury yield rose to its highest in two months and the 5 year yield rose more than 10 basis points (higher yield prices will drive up demand for US bonds).
Further concerns over the European debt crisis have sent the pound higher against the single currency today. Ireland is currently the nation under the kosh at the moment. It has been reported the Irish have rejected a bailout package from the ECB. The offer may still be taken up however, as Irish debt is currently running at over 30% of GDP, Anglo-Irish and Allied-Irish banks combined debt is roughly equal to a full years GDP. A statement from the emerald isle earlier today mentioned that they have enough liquidity to last ‘most of 2011.’ This does not sound like a long-term solution and some sort of bailout is surely necessary? (This could ironically be euro positive)
A raft of UK data out this week along with the B of E minutes from their November meeting could send the UK currency even higher as there will be very little support for further monetary easing.
Tom Hampton
Analyst – Caxton FX
The greenback extended its gains from last week as better than expected retail sales data prompted a group of Republican economists to launch a campaign calling for the Fed to reduce its quantitative easing plan. The dollar index (a measure of the dollar’s value in comparison to a basket of currencies) hit a six-week high while the 10-year US treasury yield rose to its highest in two months and the 5 year yield rose more than 10 basis points (higher yield prices will drive up demand for US bonds).
Further concerns over the European debt crisis have sent the pound higher against the single currency today. Ireland is currently the nation under the kosh at the moment. It has been reported the Irish have rejected a bailout package from the ECB. The offer may still be taken up however, as Irish debt is currently running at over 30% of GDP, Anglo-Irish and Allied-Irish banks combined debt is roughly equal to a full years GDP. A statement from the emerald isle earlier today mentioned that they have enough liquidity to last ‘most of 2011.’ This does not sound like a long-term solution and some sort of bailout is surely necessary? (This could ironically be euro positive)
A raft of UK data out this week along with the B of E minutes from their November meeting could send the UK currency even higher as there will be very little support for further monetary easing.
Tom Hampton
Analyst – Caxton FX
Friday, 12 November 2010
Ireland’s potential bailout boosts the euro
Sterling fell against the euro today – ending a run of six straight sessions on the rise - following speculation that Ireland may soon have a bailout package agreed. The supposed bailout helped to dampen fears about debt problems facing the periphery eurozone nations.
Despite poor preliminary GDP figures from France, Germany, Italy and dreadful industrial production results, the euro still managed to regain some of its losses from the past few days to currently be trading around €1.1730 against the pound.
The one saving grace for the euro is whispers in the market about an €80billion bailout package for the emerald isle. However, Ireland’s finance ministry said chatter about a bailout was untrue, but traders said reassurances from the EU and G20 that bondholders would not have to take a write down on Irish debt helped the euro to recover. It was later reiterated by the European Commission that Ireland had not requested financial aid.
It is hard to believe that GBP/EUR would have such a big movement against the grain, simply because Irish bondholders will not be taking a hit due the economy’s fragility alone. This reassurance may set some minds at ease, but stagflation in Spain and less than convincing GDP figures would surely override this? Next week we could see a full bailout plan for the Irish government, conveniently to the same tune as Allied Irish and Anglo Irish Banks combined.
Next week, with another busy week of data to be published from the UK, we could see similar gains for the UK currency.
I hope we see England drive the Aussies over the try line of parity just like the greenback has done today. Come on England!
Tom Hampton
Analyst – Caxton FX
Despite poor preliminary GDP figures from France, Germany, Italy and dreadful industrial production results, the euro still managed to regain some of its losses from the past few days to currently be trading around €1.1730 against the pound.
The one saving grace for the euro is whispers in the market about an €80billion bailout package for the emerald isle. However, Ireland’s finance ministry said chatter about a bailout was untrue, but traders said reassurances from the EU and G20 that bondholders would not have to take a write down on Irish debt helped the euro to recover. It was later reiterated by the European Commission that Ireland had not requested financial aid.
It is hard to believe that GBP/EUR would have such a big movement against the grain, simply because Irish bondholders will not be taking a hit due the economy’s fragility alone. This reassurance may set some minds at ease, but stagflation in Spain and less than convincing GDP figures would surely override this? Next week we could see a full bailout plan for the Irish government, conveniently to the same tune as Allied Irish and Anglo Irish Banks combined.
Next week, with another busy week of data to be published from the UK, we could see similar gains for the UK currency.
I hope we see England drive the Aussies over the try line of parity just like the greenback has done today. Come on England!
Tom Hampton
Analyst – Caxton FX
Monday, 8 November 2010
The dollar continues to strengthen
Investors continue to unwind their short positions in the greenback today with the US currency up across the board following on from Fridays positive employment data.
Solid non-farm payroll data and renewed concerns over the debt crisis in the eurozone have contributed to the descent of EUR/USD which is down one cent on the day, currently trading at $1.3930.
With most, if not all questions answered about another round of monetary easing in the US, the market is now able to bring the euro’s problems back to the foreground. Data suggesting that the Spanish economy is reaching stagflation, Irish and Spanish bonds hitting record highs against their German counterparts, and a scare over liquidity issues for a major Spanish bank (see last paragraph) have all helped to suppress the single currency.
The ‘buck’ has maintained its positive run against sterling as well, however the effects are muted as the pound continues its run on the euro, currently trading around €1.1580. GBP did manage to hit a peak of $1.6288 on Thursday, however the dollar has inched its way back to $1.6145.
Apart from the BoE Inflation Report on Wednesday, this week is fairly light on market moving announcements. Expect to see more problems exposed in the EU though; it is about time the truth came out.
In other news, I reported a potential ‘run’ on a major Spanish bank that was having liquidity problems. It turns out that these reports were unsubstantiated. The truth of the situation is this; a large queue formed outside a BBVA branch in Madrid. The people in said queue were in fact waiting to be issued with their numbers for a 10k run. BBVA had sponsored the runners out of the kindness of their corporate hearts, however this was misconstrued as a potential liquidity problem and BBVA’s share price fell by 2%....... Things really are that jumpy in the PIGS at the moment!
Tom Hampton
Analyst – Caxton FX
Solid non-farm payroll data and renewed concerns over the debt crisis in the eurozone have contributed to the descent of EUR/USD which is down one cent on the day, currently trading at $1.3930.
With most, if not all questions answered about another round of monetary easing in the US, the market is now able to bring the euro’s problems back to the foreground. Data suggesting that the Spanish economy is reaching stagflation, Irish and Spanish bonds hitting record highs against their German counterparts, and a scare over liquidity issues for a major Spanish bank (see last paragraph) have all helped to suppress the single currency.
The ‘buck’ has maintained its positive run against sterling as well, however the effects are muted as the pound continues its run on the euro, currently trading around €1.1580. GBP did manage to hit a peak of $1.6288 on Thursday, however the dollar has inched its way back to $1.6145.
Apart from the BoE Inflation Report on Wednesday, this week is fairly light on market moving announcements. Expect to see more problems exposed in the EU though; it is about time the truth came out.
In other news, I reported a potential ‘run’ on a major Spanish bank that was having liquidity problems. It turns out that these reports were unsubstantiated. The truth of the situation is this; a large queue formed outside a BBVA branch in Madrid. The people in said queue were in fact waiting to be issued with their numbers for a 10k run. BBVA had sponsored the runners out of the kindness of their corporate hearts, however this was misconstrued as a potential liquidity problem and BBVA’s share price fell by 2%....... Things really are that jumpy in the PIGS at the moment!
Tom Hampton
Analyst – Caxton FX
Tuesday, 28 September 2010
Sterling’s intra-day rise and fall
Sterling had a fairly bullish morning to hit highs of €1.1809 and $1.5895, before taking a tumble against every one of its major counterparts after a member of the Monetary Policy Committee expressed his views for more quantitative easing.
The pounds rally began this morning as dollar selling continued after reported comments from a former Chinese central bank advisor said that a devaluation of the US currency was inevitable. The ascent gathered more momentum as the revised CBI (Core Business Index) figure showed consumer spending had risen sharply last month when a fall was expected. Positive results in the UK’s Current Account and last quarter’s GDP figure kept the upward trend going until................ BOOM! Adam Posen, a member of the MPC said “I think further monetary easing is needed.” He went on to outline that it should begin with additional gilt buying, before leading into full fiscal stimulus and corporate debt purchase to avoid a “Japanese style scenario.”
These bearish comments have since sent the UK currency to intraday lows of €1.1680 and $1.5722.
In other news, the euro continues its demolition of the US dollar to climb to a high of $1.3509, despite ongoing concerns over the health of the European banking industry (with Ireland the focus at present) and the eurozone’s ability to meet escalating sovereign debt.
The pounds rally began this morning as dollar selling continued after reported comments from a former Chinese central bank advisor said that a devaluation of the US currency was inevitable. The ascent gathered more momentum as the revised CBI (Core Business Index) figure showed consumer spending had risen sharply last month when a fall was expected. Positive results in the UK’s Current Account and last quarter’s GDP figure kept the upward trend going until................ BOOM! Adam Posen, a member of the MPC said “I think further monetary easing is needed.” He went on to outline that it should begin with additional gilt buying, before leading into full fiscal stimulus and corporate debt purchase to avoid a “Japanese style scenario.”
These bearish comments have since sent the UK currency to intraday lows of €1.1680 and $1.5722.
In other news, the euro continues its demolition of the US dollar to climb to a high of $1.3509, despite ongoing concerns over the health of the European banking industry (with Ireland the focus at present) and the eurozone’s ability to meet escalating sovereign debt.
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