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Analysts Warned That The EuroTitle:
Focus on Greece
FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The focus remains squarely onGreece, leaving risk assets at the mercy of headlines. The Greek press reported that Prime Minister Papandreou refused to back down on his plans at an emergency cabinet meeting Tuesday evening, and still intends to hold a confidence vote in the government Friday. Similarly, a referendum on the proposed second rescue ofGreeceis still on the cards – although we note that this is not likely to happen until December at the earliest. Several government party members expressed strong reservations about the referendum throughout Tuesday, and this had a detrimental effect on investor confidence. One even resigned, reducing the government’s majority to 152/300.
However, we note that those who oppose the referendum could ...
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Dukascopy Afternoon Forex Overview : 01/11/2011
Fundamental market overview
EUR
Due to All Saints day, 1 November is a holiday in France and Italy. Nevertheless, turmoil has not ended in Greece, where current PM Papandreou is losing his power after calling a referendum regarding next tranche of bailout funds. Greek FM Stefanos Manos claims that if Papandreou continues his path of referendum, it might cause breakdown of Greek finance system, country's default and refusing from Euro.
USD
Institute of Supply management released PMI for October at 50.8 points, 1.3 points lower than forecast. October data was 0.8 points down from September reading. Construction spending increased by 0.2% in September, despite 0.4% analysts' projections, Consensus Bureau reported today. Dow has lost 207 points since opening, and is currently standing at ...
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RBA cuts rates
FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Investors took no chances overnight as a combination of event risk and growth fears put risk aversion back in the driving seat. The RBA cut rates to 4.50%, but this was of little relief as events in Athens once again put the Eurozone’s ability to resolve current problems in doubt. Greek Prime Minister Papandreou called a confidence motion in the Greek government, due to be held in parliament this week, and a referendum on the proposed second rescue package for Greece in the coming months. Both votes raise the risk of a political crisis in Greece, which is unlikely to help in the implementation of fiscal austerity measures. Even if the votes are carried, political uncertainty is likely to rise and that alone will likely keep investors ...
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Consumer spending rises, weak incomes a worry
(Reuters) - Sluggish income growth led U.S. households to cut back on saving in September to raise their spending, showing the economy's recovery remains fragile.
Consumer spending increased 0.6 percent, the Commerce Department said on Friday, after a 0.2 percent gain in August. However, incomes edged up only 0.1 percent after a 0.1 percent August drop.
The solid increase in consumer spending -- which accounts for about 70 percent of U.S. economic activity -- lends momentum to fourth-quarter output, but the economy could flag if income growth does not pick up.
"Consumers are really walking a tight rope here. They don't have much room and it's easy for them to lose balance with very modest shifts in hiring, the cost of food and everything," said Steve Blitz, senior economist, ITG ...
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Dukascopy Afternoon Forex Overview : 25/10/2011
Fundamental market overview
EUR
GFK German consumer climate struggled to push higher than 5.3 points in October, mainly due to continuous Greece debt turmoil. On the other hand, actual data outperformed the forecast of 5.1 points. Italian retail sales stalled in August, demonstrating a zero-level growth amid 0.1% forecast.
USD
Conference Board Inc. released October data of US consumer confidence today. The indicator experienced a slash this month to 39.8 points - record low of 2011 - despite consensus projections of 46.1 points. Latest reading of Richmond Manufacturing Index reports on -6 point reading in October, similar to September.
GBP
Commenting on decision to embark quantitative easing in the UK, BoE Governor King claimed that otherwise UK would face the risk of unnecessarily ...
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Euro down from 6-week high vs dollar on Merkel comments
(Reuters) - The euro retreated from a six-week high versus the dollar on Tuesday after comments from the German Chancellor tempered market optimism that policymakers will take major steps toward solving the euro zone debt crisis at a summit on Wednesday.
Angela Merkel said Germany is opposed to a phrase in the EU summit draft that calls for support for continued ECB non-standard measures, referring to the central bank's secondary market purchases of bonds.
The ECB has been buying government debt to check rising borrowing costs for some euro zone peripheral countries, notably Italy and Spain.
The euro was last trading at $1.3900, dropping sharply after Merkel's comments. It had earlier hit $1.3960, its highest level since September 8 on optimism European leaders would deliver a ...
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Euro holds near six-week high vs dollar before summit
(Reuters) - The euro held firm against the dollar on Tuesday, close to a six-week high, supported by expectations European leaders would deliver a convincing plan to contain the region's debt crisis at a summit on Wednesday.
The euro was steady at $1.3921, off Monday's six-week high of $1.3957. However, analysts said investors would need to see a positive outcome from the second summit in four days for the euro to break above $1.40, while its current strength left it vulnerable to a sell-off in the event of any disappointment.
"It will be difficult for the euro to break above $1.40 ahead of the meeting. People are happy to sit on their positions awaiting any outcome," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"The indications are that there is a will to solve ...
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Euro stays near six-week high vs dollar before summit
(Reuters) - The euro stayed close to a six-week high hit against the dollar on Tuesday, supported by expectations European leaders would deliver a convincing plan to contain the region's debt crisis at a summit on Wednesday.
The euro was down 0.1 percent at $1.3914, not far from Monday's six-week high of $1.3957. However, analysts said investors would need to see a positive summit outcome for the euro to break above $1.40, while its current lofty level left it vulnerable to a sell-off in the event of any disappointment.
Uncertainty remained about whether the plan would prevent contagion to larger countries, while there were concerns about divisions among EU leaders over the extent of the losses private holders of Greek debt would have to accept.
"It will be difficult for the euro to ...
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Analysis: Sarkozy in fight for French AAA, political future
(Reuters) - Nicolas Sarkozy is in one of the most critical weeks of his presidency as he battles to mend his differences with Germany over a euro zone crisis that threatens both France's economic wellbeing and his own political future.
A spike in French bond spreads over German Bunds mirrors the rising pressure Sarkozy is under as the relentless advance of the euro area's debt crisis throws France's top-tier position in the bloc alongside Germany into question.
The premium investors demand to hold French 10-year bonds soared to 120 basis points over Bunds, three times the normal level, since Moody's said last Monday it was scrutinizing the outlook on France's triple-A rating in light of slowing growth and costly euro zone bailout commitments.
Penned in between hawk-eyed rating analysts ...
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