Aggressively To The Eurozone Crisis

U.S. Review Look Past the Monthly Volatility and See the Trend This week of economic releases painted a somewhat mixed picture, but the underlying trend still reflects an economy that is growing at a modest pace. The milder-than-usual winter likely brought some activity forward and below-consensus readings are due in part to payback. Housing starts, existing home sales and industrial production all posted disappointing readings in March that are likely not indicative of the underlying trend. Headline retail sales, however, came in more than double the consensus estimate in March, ending the first quarter on a positive note. Early Spring Brings Payback Period The full week of economic releases painted a somewhat mixed picture, but the underlying trend still reflects an economy ...

Forex News and Events: The optimism which sprang from yesterdays the Spanish bill auctions (which went reasonably well) and strong German ZEW seems to have been faded . EURUSD has traded back down to 1.3074, while European equities are trading in the red (after a very strong start in Asia). And what is left is the realization that despite the temporary confusion and noise, the problems in Europe are not going anywhere--rather in fact, the cracks are multiplying and widening. This crisis has always come in waves, with each wave higher than the one before. It seems that Europe rather than helping themselves by perhaps having the ECB step in aggressively to the secondary bond markets, has instead allowed it’s leaders to continuously pin their rescue hopes on the IMF and world bank. While the ...

Fundamental Analysis EUR "The outlook for the industrial sector is bleak" - Martin van Vliet, an economist at ING Group Euro-area industrial production unexpectedly rose in February, even as the region’s economy continued to slide into a recession. Production increased 0.5 per cent from January, said the European Union’s statistics office in Luxembourg on Thursday. USD "Import prices were certainly a problem for businesses in the last three months, but we’ve seen those pressures ease" - Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC The number of Americans claiming for unemployment benefits rose to 380 thousand in the week ended April 7 from the week before, said the Department of Labor on Thursday. GBP "Concern persists that U.K. exports will be limited in the near ...

Technical Analysis EUR/USD "Raising the size of the euro zone bailout fund will be supportive for the euro, although the market is already aware of it" - JP Morgan Private Bank (based on CNBC) Rally of EUR/USD is unlikely to appear on the chart on the occasion of the fact that a number of significant resistances are located in close proximity of the current price - 1.3379, 1.3435 and 1.3487. EUR/JPY "The worse-than-expected Tankan survey seems to be fueling talk that the BOJ will ease policy further" - Forecast Pte (based on Bloomberg) Despite a recent failure of EUR/JPY to overcome resistance at 111.57, the currency couple is anticipated to make another attempt to breach it. GBP/USD "The expectation from the OECD that the UK is about to fall into another recession makes quantitative ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD The lack of any economic data releases overnight allowed the US dollar to get back on its feet and reclaim some lost ground. Still tempering the US dollar’s upside is the cautious stance of Fed Chairman Bernanke, who said in a transcript of an impending television interview that “it’s far too early to declare victory” and while “the recent news has been good&I think we need to be cautious and make sure this is sustainable”. In response to a question about further easing, Bernanke noted “we don’t take any options off the table…we don’t know what’s going to happen in the future, and we have to be prepared to respond to however the economy evolves”. That said, there is nothing here that alters our view that the US recovery will be ...

Forex News and Events: It seems that no matter how much the market tries to convey the critical and fragile nature of the current crisis, European leaders again have pushed the crisis to the cliff's edge. Risk appetite firmed as cut China the RRR by 50bp and Greek cabinet has approved further austerity measures of €125mio over the weekend. EURUSD consolidated its gains around the 1.3200 but momentum has clearly stalled. Greece will be the key item on the agenda of the Eurogroup today and we suspect that appetite for new positions will remain light. With issues emanating from Iran, oil continues to gain. Should Brent close above $121.00 its would clearly indicate a broader push to all time highs of $127.00 . This price action should trigger further gains in beta currencies especially ...

Forex News and Events: High yielding currencies continued to outperform as the developed nations central banks have all committed to a sustained period of ultra-loose monetary policy (unlimited free liquidity) and the contraction of volatility has put the carry trade back on the map. As with the crowded dividend trading in the equity markets, we suspect that growth projections in many of these nations have already been priced in. So the kicker at this point will only be the interest rate differentials and trading momentum. Australian retail sales came in slightly weaker than expected at -0.1% m/m vs. 0.2% exp although there was little spillover into the AUD. AUD OIS are pricing in a 70% probability of a 25bp cut at tomorrow RBA meeting so we are also looking for a quarter worth of ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) USD EURUSD continued its post-summit slide as the market has reverted to the conclusion that not enough has been done. Although some stability measures for financial markets have been welcome, the summit agreements themselves raise plenty of new questions, to which the market is not convinced that the answers would be favourable, such as the ratification process and the relevant democratic mandates by individual EU governments. In addition, investors are also querying whether enough has been done to avoid some major downgrades in the coming weeks and months from all the ratings agencies. French President Sarkozy appears to be resigned to the fact that his country will lose the coveted AAA rating, which would immediately translate into new ...

Forex News and Events: FX remains dominated by the scheduled events in Europe today and Friday. With the ECB and EU summit being the critical events. Our base case scenario is that a strong response by the ECB with cuts in headline policy rate and additional nonstandard measures to address funding issues in the ailing banking sector should be risk positive – at least in the short term. The Bank of England convenes on Thursday for their last scheduled monetary policy meeting of 2011, but it is widely expected that no changes to rates or the asset purchase target will materialize. The last announced increase to asset purchases (an additional 75bn sterling) is not due to be completed until early in the new year, and economic fundamentals in the past month have not yet justified commitment ...