Dominant Driver For The Euro

Fundamental Analysis EUR "...markets have been overoptimistic after the extra liquidity provided by (the European Central Bank). We will see stocks moving lower" - Christian Tegllund Blaabjerg, chief economist at FIH Erhvervsbank Shares closed mixed on Thursday. The Stoxx Europe 600 Index gained 0.12 per cent to 259.07. Germany's DAX Index retreated 0.13 per cent and France's CAC 40 Index gained 0.19 per cent. The U.K.'s FTSE 100 Index rose 0.35 per cent to 5,723.67. USD "The economy does continue to grow, but slowly" - John Carey, a fund manager at Pioneer Investments U.S. stocks fell on Monday after a report showed the U.S. economy added less jobs than expected. GBP "Negative sentiment turned positive as Spanish bond yields retreated following an earlier spike" - Angus Campbell, the ...

(Reuters) - The euro dropped to a three-week low against the U.S. dollar on Wednesday after European Central Bank president Mario Draghi said the euro zone economic outlook is subject to downside risks, leaving the door open for more policy action. The euro came under pressure as Draghi's dovish comments contrasted with minutes from the U.S. Federal Reserve's March policy meeting, released on Tuesday, that showed U.S. policymakers were less keen on adding monetary stimulus as the American economy improves. Draghi's comments, which came in a news conference after the ECB, as expected, announced it was holding interest rates at 1.0 percent. With the U.S. economy improving, U.S. short term rates could start rising before those in the euro zone, removing a key weakness for the U.S. dollar. ...

(Reuters) - The euro slumped to its lowest level against the dollar in three weeks on Wednesday after European Central Bank President Mario Draghi said the euro zone economic outlook is subject to downside risks, leaving the door open for more policy action. The euro came under pressure as Draghi's dovish comments contrasted with minutes from the U.S. Federal Reserve's March policy meeting, released on Tuesday, that showed U.S. policymakers were less keen on adding monetary stimulus as the American economy improves. A widening interest rate differential between the euro zone and the United States would favor the dollar over the euro. The single currency was already under pressure after Spain's borrowing costs jumped at a bond auction. Losses accelerated after Draghi's comments, which ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) USD The euro extended its weakness during the Asia session amid concern over the failure of Eurozone authorities to secure an aid package for Greece before bond redemptions are due. In comments made after the Eurogroup conference call, Jean Claude Juncker merely said ‘decisions’ would be made at next week’s full meeting but it appears doubts remain over Greece‘s ability to deliver. The stop-gap solution seems to be to come up with enough funds to repay creditors only while withholding other forms of aid. A bridging loan to last the next month is being planned, though essentially this is only buying time for a fuller discussion on the merits of a longer-term plan. The headlines were a wake-up call to a market that had grown complacent about the ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) USD The euro suffered overnight as fears over the situation in Greece have resurfaced. While the market is hoping for a clinching of a debt swap deal today with private sector creditors, securing cross-party support for further austerity measures and securing further funding from the troika is proving far more difficult. According to political leaders in Athens, the main parties have until noon today (local time) to respond to the troika’s demands, and so far there appears some distance between where the national unity government lies and the IMF’s targets. Talks continued late into the evening on Sunday and will resume today between the troika and the local authorities. Reports suggest that the main point of contention lies in private sector ...

If you were burned by emerging market stocks last year, you might want to give the relationship another chance in 2012. The stocks are doing pretty well so far this year, and analysts point to multiple reasons the gains should continue. During the first four weeks of the year, Vanguard's MSCI Emerging Markets, the largest emerging market stock index ETF, was up nearly 11.6 percent - more than double the 5 percent return for the SPDR S&P 500. The upswing indicates to investing experts that a drop of almost 20 percent in emerging market stocks last year wasn't a bubble bursting. "After burning investors last year, we expect the BRIC countries to be among the top-performing markets in 2012," said Ned Davis Research analyst Anthony Welch of the four dominant emerging markets: Brazil, Russia, ...

The Weekly Bottom Line : 28/01/2012 HIGHLIGHTS OF THE WEEK United States The Federal Reserve committed to keep rates on hold through the end of 2014 this week, while today's Q4 GDP released underscored the fragility of the economic recovery. Unfortunately, further monetary easing isn't what is going to provide the jolt the economy needs. What's holding the economy back right now isn't the price of credit; it's the lack of quality borrowers. The pool of potential borrowers willing and able to take advantage of lower interest rates is limited. And as long as aggregate demand remains depressed, businesses will continue to put off investing until the economic outlook improves. What the economy needs right now is more effective fiscal policy solutions. However, fiscal policy so ...

Economic Data Analysis Spectre of Greek PSI Eclipses Fed Meeting Greek PSI deal disappointment could derail fragile improvement in confidence. US Q4 GDP to post upside surprise, Fed policy expected unchanged, but policy goals debated? UK Q4 GDP to show start of renewed recession, MPC minutes to record votes for more QE. Last week's positive tone ended abruptly with S&P's ratings downgrade of key Euro area economies. Nevertheless, sentiment has slowly inched higher, in part on improving US releases, including corporate earnings reports, but also on successful European debt auctions and the prospects for the Greek debt restructuring (PSI). A Greek PSI deal will be key for the coming week. On balance we are hopeful that an agreement can be reached for Monday's finance ministers ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) USD Expectations continued to build overnight for impending solutions for the Eurozone sovereign debt crisis. Several different papers have reported different plans, from enlarged ECB resources to even the Fed providing funding to the IMF. Eurozone leaders will start meeting today to set the groundwork for Friday’s crunch talks. True, it seems that the market has been here before, only to be disappointed at every single turn, but the vibes fromBerlinandFrankfurtsuggest that the political establishment and the European Central Bank have now reached an understanding on what needs to be done. Perhaps more importantly, the leaders now recognize what is at stake, for the rhetoric on Eurozone breakup by the most pro-European of leaders are now at ...