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US Dollar Pulls Back as Risk Appetite Makes an Appearance
After a few days of gloom over Europe, risk appetite is making an appearance in the financial markets. US dollar is pulling back from recent highs against the euro and the pound, and heading lower as Forex traders look for a little extra yield, and as a degree of optimism is seen as moves are made to shore up Spain.
US dollar was headed higher today, moving up as news about Great Britain’s economy disappointed. However, the Bank of England put quantitative easing on hold, and it appears that the body is prepared to maintain that position. So, even with the British economy in recession, the pound is getting a slight boost against the US dollar.
Against the euro, greenback reached a three-month high. Uncertainty about Greece continues, and worries about the relationship between France and ...
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BoE Abandons QE - as Expected, But Still Controversial
BoE Abandons QE - as Expected, But Still Controversial
Key points
- BoE leaves base rate and asset purchase target unchanged - disappointing and slightly controversial.
- The BoE might revive the QE programme at a later stage but we doubt that the Bank will buy more Gilts this year.
The Bank of England today decided to leave the asset purchase target unchanged at GBP325bn and the base rate unchanged at 0.50%. This was in line with our expectations and the consensus forecast in the market. A few forecasters believed the MPC would announce more Gilt buying. The BoE refrained from issuing a statement.
The decision is in many ways disappointing. In our BoE preview "Real monetary stimulus - no more QE, please", we proposed the BoE could consider either 1) cutting the base rate by 25bp ...
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Jobless claims fall, trade gap widens
The number of Americans submitting new applications for jobless benefits edged down last week, easing concerns the labor market was deteriorating after April's weak employment growth.
While the claims data indicated the economy remained on a moderate growth path, a report from the Commerce Department showing a widening in the trade deficit in March suggested economic growth was much slower in the first quarter than initially believed.
New claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 367,000, the Labor Department said on Thursday. The prior week's figure was revised up to 368,000 from the previously reported 365,000.
Economists polled by Reuters had forecast claims inching up to 369,000 last week. The four-week moving average for new claims, considered a ...
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Gold steadies as euro lifts from 3-1/2 month low
(Reuters) - Gold steadied in Europe on Thursday after falling to a four-month low in the previous session, as an uptick in the euro after Spain moved to clean up its banks and Europe's bailout fund approved a key payment to Greece took some pressure off prices.
While the euro zone debt crisis is continuing to simmer, moves to address some of its problems are improving appetite for assets seen as higher risk, like stocks and commodities, as well as the single currency.
Spot gold was at $1,589.40 an ounce at 05.26 a.m. EDT against $1,590.45 late on Wednesday, when it fell as low as $1,579.30 an ounce, its weakest since early January.
Prices have fallen 3 percent this week as concerns over the euro zone debt crisis pressured the euro and other risk assets. While investors bought gold as a ...
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Risk Recovery Looks Fragile
It's one step forward and two steps back for risk at the moment. On the one hand we heard yesterday that Greece was 'more than likely' to receive its next aid tranche in order to cover a bond redemption due later this month, yet the political deadlock from Sunday's election is now entering its fourth day. The chances are that Greece will have to go back to the polls next month (at the cost of about EU 18mn) and the financial markets are concerned that the electorate will choose an anti-austerity party as its first choice.
The choice is up to the Greeks
However, Greece may not like austerity, but it also wants to remain in the Eurozone. EU officials, particularly in Germany, have broken the taboo that no one can leave the Eurozone and started to publically announce that Greece has to ...
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More QE From The BOE?
The Bank of England concludes its May meeting today. We expect no change in interest rates or in the Bank's GBP 325 billion of asset purchases, however this decision will be particularly close due to the continued weakness in the UK economic data and deteriorating sovereign situation in the Eurozone.
Why would the BOE do more QE? The main reason is down to growth. The UK economy plunged back into recession in the first quarter of 2012, consumption remains weak, exports have fallen sharply and bank lending to businesses continues to contract at a 3.5% annual rate. This is worse than in the Eurozone, where lending is flat, and the US where lending is up more than 10% over the past year. This is hurting business growth and keeping upward pressure on unemployment. Thus, more QE could ...
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Market Drivers - Currencies : 10/05/2012
Today's Comment
Greek election: Also the second largest party in Greece failed in obtaining a majority in order to form a government. The mandate has now been passed on to the third largest party, which is the last party that will be given the mandate. It now has three days to obtain a majority. It now becomes increasingly unlikely that it will be possible to form a government. A new election is no longer unrealistic. Yesterday a major European opinion poll showed that more than 50% of investors expect Greece to leave the euro at some point.
UK BoE interest-rate meeting: Several research institutes point out that due to the fact that the UK has slid back into recession, the BoE will initiate a new round of asset purchases (QE). Our macro-economists assess that due to the high inflation ...
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Crude oil tries not to decline
Crude oil is being so volatile at today’s session after huge losses achieved during the last six sessions, the EFSF played a significant role in easing tensions today after it approved to give Greece a 5.2 billion euro tranche which eased fears over the near-term outlook for the country.
After achieving huge losses, the door is open for crude to rise slightly and any small positive factor would support it and help it in climbing upwards. And we can see this in today’s trading which showing some positivity due to EFSF’s decision.
However, this optimism that seen in Europe is temporary and would be vanished soon if nothing major comes out, as the 5.2 billion euro tranche for Greece would let the country to meet its short commitments, but what it will do for the longer commitment if lenders ...
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Dukascopy Morning Forex Overview : 10/05/2012
Fundamental Analysis
EUR
"The real concern isn’t about Greece, it’s about the euro and whether it breaks up -- that is key."
- Mark Tinker, a fund manager at AXA Framlington Investment EUR Management
European stocks declined on Wednesday as investors awaited resolution of Greek coalition talks and yields on Spanish 10-year bonds rose above 6 per cent.
USD
"Certainly as a result of the elections in Greece, the odds of a default and an exit from the euro have increased."
- James Dunigan, chief investment officer for PNC Wealth Management
U.S. wholesale inventories rose in March at a slowest pace since November, Commerce Department data showed on Wednesday.
GBP
"Consumers, struggling to balance their household budgets, remain reluctant to spend..."
- Stephen Robertson, BRC director ...
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