Adverse Market Reaction

Forex News and Events: In the UK, Fitch revised the UK's ratings outlook to negative, putting them in line with Moody’s. The ratings agency reaffirmed that the government’s fiscal plan was creditable, but stated “The revision of the rating outlook to negative from stable reflects the very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery.” In the US, the domestic data continued to show signs of improvement. Empire State manufacturing index rose to a 21-month high of 20.2 in March (other components were slightly less optimistic) while initial jobless claims dropped back to 355k. Given the recent price action the FX markets are not focused on the US economic data as a ...

(Reuters) - Asian shares and the euro inched up on Friday after a flood of cheap European Central Bank funds this week eased fears of a meltdown in the euro zone financial sector, overriding some weak data and concerns about surging oil prices. The MSCI Asia Pacific ex-Japan .MIAPJ0000PUS rose 0.4 percent, but stayed below a seven-month high touched on Wednesday. The index was set to add nearly 1 percent for the week. Japan's Nikkei .N225 was up 0.5 percent, but pared some early gains on profit-taking. The ECB's half a trillion euros in cheap, 3-year loans added to the banking system this week underpinned markets, driving down bond yields of highly-indebted euro zone governments, such as Italy, on Thursday. "Central banks around the world keeping the global financial system awash with ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD The Australian dollar fell towards the end of the Asia session after Fitch downgraded the ratings of three Australian banks. Earlier, AUD got a modest boost from parliamentary testimony by RBA Governor Stevens who painted a relatively upbeat picture of the economic outlook. Crucially, he stuck to previous guidance and did not suggest the RBA is poised to cut the cash rate. Looking to external risks, Stevens said China is getting on top of its problems around inflation and the property market. However, he sounded more cautious on Europe, noting anxiety over the sovereign debt crisis has not gone away, nor will it for some time. EURNOK traded back above 7.50 overnight, having forcefully broken below a key support level at 7.48 yesterday. ...

(Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday warned Congress that putting off a decision on the fate of expiring Bush administration tax cuts could unsettle businesses and households, undercutting the U.S. economic recovery. With presidential and congressional elections looming in November, many analysts think Congress is unlikely to act until the final months of the year. The tax cuts expire on January 1. Bernanke told the Senate Budget Committee that lawmakers might not have the luxury of waiting. "I don't know exactly when the uncertainty would become a factor, but surely as we get closer to January 1 and Congress has not given a clear road map for how it plans to proceed, that would certainly affect planning, business decisions, household decisions, as they look ...

After a quiet start for today’s session, where currencies were trading within a tight range in anticipation for the king of reports; the main risk-event for today in the form of the employment report; the NFP came to break the silence as it screamed 243,000 new jobs were surprisingly added to the economy, the numbers came way off market consensus of 150k. The unemployment rate slipped to 8.3% from 8.5 in December, while economist expected a steady rate at 8.5%. These positive numbers were mainly supported by job growth in the service sector as it added around 162k jobs. The EUR/USD pair initial reaction was to the upside; however it quickly reversed and fell sharply; at the moment trading around 1.3110, while the positive news may be good for the risk-appetite, at the current global ...

The Week Ahead Highlights Crunch time in US debt negotiations QE3 - not so fast Europe's stress test results with a caveat CHF and JPY strength prompts jaw-boning Divergent economic performance in Oceania Key data and events to watch next week Crunch time in US debt negotiations US congressional leaders and the White House appear far from reaching any sort of comprehensive ‘grand bargain' to cut the US deficit and raise the government's debt ceiling. Talks are ongoing, but the rhetoric on both sides seems to be deteriorating, suggesting that compromise may be falling out of reach. Time is tight and a deal needs to be reached by the end of next week to allow for legislative passage before the drop dead date of Aug. 2. At this point, we see three main potential ...

Economic Data Analysis Politics Poisons Debt Debate Safe-haven buying rose sharply on Eurozone contagion, affecting Spain and Italy, as officials disagree on next steps, while US debt ceiling concerns mount. Reaction to EBA bank stress tests and possible further discussions this week will guide the contagion outlook. White House stressed debt ceiling deal must be reached by next Friday to allow legislative timeframe for 2 August. MPC minutes likely to show hopes for more QE overdone. June's retail sales should post rebound. The Eurozone crisis plumbed new depths this week with Eurozone finance ministers suggesting the need for Greece to default on some of its obligations. Contagion washed across the currency area with Spain and Italy high profile casualties, with the ...

Forex News and Events: There is currently a dizzying array of risk in the system which is making focus complicated and anything but short term positioning difficult. USD came under heavy fire yesterday as Moody’s placed the US’s cherished AAA rating on review for a possible downgrade. Safe-haven trades and commodity traders were the biggest gainers, with the USDCHF dropping to 0.8183. The rating agency cited that the lack of progress in debt ceiling negotiations as a key rational for the review. The greenback was already on back footing as Bernanke’s Congressional testimony emphasized the uncertain and cautious path of economic growth and markets took the comment as indication that further quantitative easing was still on the table. While these comments reiterated themes that were ...

Economic Data Analysis Greek Tragedy? EU crisis to dominate, as spectre of Greek default reaches fever pitch US FOMC to keep policy unchanged, but allude to growing downside risks MPC minutes likely to confirm the Committee remains in no mood to tighten UK public finances likely to highlight case for fiscal restraint Market attention looks almost certain to be dominated by the unfolding developments in Greece and the wider European periphery over the coming week. The possibility that Greece could be forced into a sovereign default, and the potential contagion this could precipitate across Europe, has been thrown into sudden and sharp relief as the political situation in Greece has descended into chaos over the last few days. EU sovereign debt crisis: The violent riots in ...