Break Through Parity

Fundamental Analysis EUR "Fears of a Greek exit from the euro zone and the negative consequences from that are prevailing" - Ben Kwong, KGI Asia European stocks edged lower after Fitch downgraded Greece’s credit rating to ‘CCC’, implying that the country is vulnerable and highly dependent on favourable economic conditions to fulfill its financial obligations. USD "If there were scope to do another twist of some type it would be prudent to consider it, especially in the scenario where things are worse and the Fed feels like it needs to move" - Nathan Sheets, Citigroup Inc. Fed policymakers might potentially launch another round of Operation Twist rather than a direct asset purchases in case of increased risks or further weakening of the US economy. GBP "We must work together to give ...

Fundamental Analysis EUR "Spain, once again, is where the confidence game is played" - Sebastian Paris Horvitz, strategist at HSBC Private Bank Suisse Spain sold the maximum targeted amount of debt, 2.5 billion euros, during yesterday’s auction with spiking borrowing costs. The interest rate of three-year bonds rose to 4.373% from April’s figure of 2.89% while interest rate of five-year bonds surged to 5.106% from 3.374 in March. USD "What we’re seeing in foreign-exchange markets is strong demand for the U.S. dollar" - Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA Latest US initial unemployment claim data was released yesterday – 370 000 Americans demanded their jobless benefits last week versus a 368 000 consensus forecast. The Labor Department revised ...

Central Banks' to the Rescue? The Bank of England stole the headlines this morning as it delivered its second Inflation Report of the year. Its message was fairly grim: the UK won't regain its 2007 level of output until 2018. The biggest threat to the UK economy right now according to the bank is the impasse in the Eurozone (something the BOE can't control). The BOE: "blame the Royal Family and the Eurozone" However, the one thing it can control is QE and interest rates, and it kept the door to more QE firmly open today. It noted that Q1 GDP figures could be revised higher, however a number of "one off" factors like the Queen's Jubilee bank holiday this year could knock 0.5% from GDP. This "holiday" could have a more damaging economic effect than the Royal Wedding, according to the Bank. ...

Forex News and Events: The S&P GSCI Index reversed its 2011 gains in the last six consecutive trading sessions. As a matter of fact, the index tracking 24 commodities broke down 7.6% from a high of 684.15 on April 30th to a more than four-month low low of 634.25 during yesterday’s trade session. This downturn in commodity prices can be explained on the one hand by headlines from the Euro area, as markets seem to be pricing in a second round of elections in Greece as well as a probable EU exit. On the other hand, the marked slowdown of commodity-intensive economies such as China -see Newsletter May 14- pushed prices lower in light of atrophied demand and lower infrastructure investments. From the foreign exchange perspective, the Australian dollar having experienced a 34% appreciation ...

The euro slipped to a near four-month low on Monday as political turmoil in Greece highlighted the risk it might exit the euro zone, while worries about slowing Chinese and global growth drove down higher-yielding currencies. Safe-haven currencies, including the dollar and the Japanese yen, rose as coalition talks in Greece hit an impasse on Sunday, increasing the chance of another election. Euro-zone industrial production unexpectedly fell in March, adding to signs the bloc is heading into recession, further fuelling bearish sentiment, while Spain's short-term debt costs rose at auction and its 10-year yields soared. "Beyond the ongoing turmoil in the European financial system, policymakers in Greece are certainly running out of time as they struggle to form a coalition," said David ...

The euro fell to a near four-month low on Monday as political turmoil gripped Greece, highlighting the risk the country may exit the euro zone, while worries about slowing Chinese and global growth drove down higher-yielding currencies. Safe-haven currencies including the dollar and the Japanese yen rose as coalition talks in Greece hit an impasse on Sunday, increasing the chance of another election. Euro zone industrial production unexpectedly fell in March, adding to signs the bloc is heading into recession and further fuelling bearish sentiment, while Spain's short-term debt costs rose at auction and its 10-year yields soared. The common currency fell to $1.2861 on trading platform EBS, its lowest level since January 23. It has lost 2.7 percent so far this month after losing 0.8 ...

What’s new: Global Markets: Asian markets up after China cuts RRR China: People’s Bank of China cuts Required Reserve Ratios by 50 basis points Spain: More than €30 bln to clear real estate exposure from Spanish Banks Forex: AUD/USD hits a 5-month low at 0.9999 Forex: EUR/USD dips down to 4-month low at 1.2878 Forex rates in Asia and Indices: Low High Change EUR/USD 1.2879 1.2905 -0.20 % USD/CHF 0.9309 0.9326 -0.21 % GBP/USD 1.6054 1.6079 -0.03 % USD/JPY 79.89 80.13 -0.12 % EUR/CHF 1.2009 1.2014 -0.00 % EUR/JPY 102.99 103.37 0.08 % Dow Jones 12779.28 12918.01 -0.26 % Nasdaq 2604.99 2643.22 -0.00 % S&P 500 1348.89 1365.66 -0.33 % Nikkei 225 ...

April's unemployment rate eased to 8.1%, but it was a mainly because of people leaving the workforce. The Non-Farm Payroll data came out 115K, disappointing a 173K forecast which the market has been scaling back throughout the week. March data was revised from 120K to 154K. Although the data came out very weak, the market seems to have been prepared for this disappointment, and the reaction in the currency market was not clear at first. Source for the charts from the Bureau of Labor Statistics: http://www.bls.gov/home.htm 2 straight months of weak employment data adds to probability of QE. This could be a reason the USD is being pressured, although risk aversion should boost the USD.So USD direction is not clear. The clearer reaction is coming from the commodity currencies like the AUD ...

The UK Defies the Odds The big mover of the day was the pound after some better than expected labour market data and a surprise change in stance from one of the Bank of England's most noted doves. Adam Posen's shift towards the majority (i.e., the fence) from voting for more stimuli at the March meeting seemed to have the most impact on the market as it dramatically reduces the prospect of more QE in the near-term. It wasn't that long ago that the UK was expected to get more QE next month, those plans seem to have been shelved for now. The tone of the minutes was fairly upbeat compared to previous months. The Bank noted that funding conditions for the financial sector picked up strongly, and banks in the UK could issue healthy levels of debt in the public markets, suggesting they were ...