Having waited with bated breath for a tragic Portuguese bond auction and the next jolt in the euro’s demise, the market was bitterly disappointed.
Having stayed within a sixty pip range yesterday, the possibility of the single currency freefalling was all but snubbed out. A strong auction for Portuguese bonds quelled immediate concerns about the country’s debt problems and forced GBP/EUR to trade within an even smaller range this morning. The 17-nation currency barely moved after Lisbon sold €1.29billion in debt, including ten year bonds which were sold at a lower average cost than the previous sale.
Although the euro may have survived this round, it will remain under heavy selling pressure and remain near its four month low against the pound. Bond auctions from both Spain and Italy tomorrow will be heavily scrutinised, while Portugal is still expected to seek a bailout for its mounting debt.
Positive speculation (that interest rates will rise sooner than thought to fight inflation) ahead of tomorrow’s interest rate decision from the BoE has sent the US dollar temporarily downwards against GBP. Also, a lack of any news out of the US has not helped with the greenbacks lack of support this week. However, with trade balance and PPI data out tomorrow, we could see a resurgence, especially against the euro.
If you do have any currency related questions, or an opinion on the next interest rate decision, please feel free to comment below.
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, 12 January 2011
Tuesday, 11 January 2011
The euro hovers before Portugal’s bond auction tomorrow
Sterling remains near its four month high against the floundering euro as the debt crisis continues to undermine the single currency.
The euro has managed to claw back a few points against the pound; however the pair have remained within a fifty pip range and near the four month high. The general opinion within the market seems to be for GBP to make further gains against the seventeen nation currency. Focus is fixed firmly on Portugal’s bond auction tomorrow. The question as to whether the more indebted nations within the EU can raise money is keeping EUR very much on the back foot. If the Portuguese do not manage to raise the necessary funds from the debt market, they will be forced to turn to the EU and IMF for financial aid.
Further bond auctions on Thursday for Spain and Italy could set the tone for the next few months, despite China and Japan’s rescue efforts.
In other news, it is bonus season for many city institutions and rumours are rife. JP Morgan are reported to be sharing £4.2billion between their 11,000 staff in London, the question of how big the bonus pool is at RBS is making politician’s blood boil and now Barclay’s is finding its name in the tabloids crosshair. Why? Well, the points outlined are based around the use of Cayman Island bank accounts to minimise the amount of tax paid in the UK and US. Which financial institution doesn’t? Surely we should revere a bank that made it through the financial crisis without needing to be bailed out? Surely we should take notes on the fact they came through the bad times having picked up some of the best bits of some failing companies? And, surely Bob Diamond deserves his £8million far more than Stephen Hester deserves his £2.5million?
If you have any strong views on bankers bonuses or currency related questions please feel free to make a comment.
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
The euro has managed to claw back a few points against the pound; however the pair have remained within a fifty pip range and near the four month high. The general opinion within the market seems to be for GBP to make further gains against the seventeen nation currency. Focus is fixed firmly on Portugal’s bond auction tomorrow. The question as to whether the more indebted nations within the EU can raise money is keeping EUR very much on the back foot. If the Portuguese do not manage to raise the necessary funds from the debt market, they will be forced to turn to the EU and IMF for financial aid.
Further bond auctions on Thursday for Spain and Italy could set the tone for the next few months, despite China and Japan’s rescue efforts.
In other news, it is bonus season for many city institutions and rumours are rife. JP Morgan are reported to be sharing £4.2billion between their 11,000 staff in London, the question of how big the bonus pool is at RBS is making politician’s blood boil and now Barclay’s is finding its name in the tabloids crosshair. Why? Well, the points outlined are based around the use of Cayman Island bank accounts to minimise the amount of tax paid in the UK and US. Which financial institution doesn’t? Surely we should revere a bank that made it through the financial crisis without needing to be bailed out? Surely we should take notes on the fact they came through the bad times having picked up some of the best bits of some failing companies? And, surely Bob Diamond deserves his £8million far more than Stephen Hester deserves his £2.5million?
If you have any strong views on bankers bonuses or currency related questions please feel free to make a comment.
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Friday, 7 January 2011
Sterling start to the New Year
The pound’s outperformance continued through until the end of the year’s first trading week, taking the price over €1.20 for the first time since September 17th 2010.
On the afternoon of Thursday 6th Caxton FX sent copy to the FT for Saturday publication. The feature discussed whether or not the euro would reach 1.20 in 2011; before close of play Friday the euro had already reached this level. The speed at which the rate rose (4.0% in 4 days!) indicates just how quickly the market is shifting at present. This high level of volatility highlights the importance of regular and accurate analysis - sign-up for daily analysis from Caxton FX.
The question now is, will the rise in the euro continue unabated, or will it reach a plateau? All comments welcome...
Duncan Higgins
Currency Market Analyst
Caxton FX
On the afternoon of Thursday 6th Caxton FX sent copy to the FT for Saturday publication. The feature discussed whether or not the euro would reach 1.20 in 2011; before close of play Friday the euro had already reached this level. The speed at which the rate rose (4.0% in 4 days!) indicates just how quickly the market is shifting at present. This high level of volatility highlights the importance of regular and accurate analysis - sign-up for daily analysis from Caxton FX.
The question now is, will the rise in the euro continue unabated, or will it reach a plateau? All comments welcome...
Duncan Higgins
Currency Market Analyst
Caxton FX
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.
Thursday, 6 January 2011
The euro’s slide continues
Despite disappointing data from both the UK and US, the euro has not been able to make up any lost ground.
Sterling did take a slight knock this morning as the UK’s Services PMI figure came in at 49.7, well below the expected result of 52.9. However, any losses were soon regained and the pound hit an intraday high of €1.1855 against the single currency.
Aside from some slightly disappointing employment data, the greenback continues to climb. The euro is now just a shade away from collapsing below $1.30 and who would bet against the move coming as early as tomorrow?
The 17 nation currency continues to go from bad to worse. What would normally be bullish news, a successful Portuguese bond auction, turned sour as the premium Portugal will have to repay went up by well over 100 points. The news that the EU is potentially going to issue Europe wide bonds (rather than country specific) smells horribly like the actions bankers took in combining securities that got the world in this mess in the first place. Next week Italy and Spain will both have their first bond auctions of 2011. It will be very interesting to see what premium they will have to pay to secure finance. All-in-all, this storyline has legs and will dominate most of 2011.
In other news, well not that far from the apple tree, China’s shopping spree for entire nations (behind FT paywall) continues as they pledge to buy €6billion of Spanish debt. This is being viewed as a simple engagement to try to open up foreign markets to Chinese exports. However, with their cheaper yet comparable products, ownership of foreign government debt, vast currency and commodity reserves, could this be just another move to knock America from the top of global economics?
Tom Hampton
Analyst – Caxton FX
For the latest forex news and views, follow us on twitter @caxtonfx and sign up to our daily report.
Sterling did take a slight knock this morning as the UK’s Services PMI figure came in at 49.7, well below the expected result of 52.9. However, any losses were soon regained and the pound hit an intraday high of €1.1855 against the single currency.
Aside from some slightly disappointing employment data, the greenback continues to climb. The euro is now just a shade away from collapsing below $1.30 and who would bet against the move coming as early as tomorrow?
The 17 nation currency continues to go from bad to worse. What would normally be bullish news, a successful Portuguese bond auction, turned sour as the premium Portugal will have to repay went up by well over 100 points. The news that the EU is potentially going to issue Europe wide bonds (rather than country specific) smells horribly like the actions bankers took in combining securities that got the world in this mess in the first place. Next week Italy and Spain will both have their first bond auctions of 2011. It will be very interesting to see what premium they will have to pay to secure finance. All-in-all, this storyline has legs and will dominate most of 2011.
In other news, well not that far from the apple tree, China’s shopping spree for entire nations (behind FT paywall) continues as they pledge to buy €6billion of Spanish debt. This is being viewed as a simple engagement to try to open up foreign markets to Chinese exports. However, with their cheaper yet comparable products, ownership of foreign government debt, vast currency and commodity reserves, could this be just another move to knock America from the top of global economics?
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
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