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Thread: Daily Reviews of major currencies from GlobeGain.com

  1. #101
    Globe Gain is offline Senior Member
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    Default 20/06/2012 QE, Twist or nothing?

    EUR/USD



    Those, who ventured to stake on risk yesterday morning, must have been generously rewarded in the evening. Though at the end of Monday’s trading the single currency sank to 1.2550, already yesterday evening it found enough strength to test the 1.27 level. Today’s quotes remain close to this mark. The Fed’s meeting is ahead. In the last few days it has been widely rumoured that the FOMC will react to the weak market data with another round of Operation Twist. The major advantage of such steps over the additional purchases consists in the absence of any inflationary aftereffects. The fact that the market more expects Twist than Q3 is seen in the reaction of Gold and Oil. These commodities usually face a strong rally on the expectations of higher inflation, however this time it’s more likely that their growth simply reflects depreciation of the dollar. Meanwhile, the stock exchanges on the contrary look much more cheerful, as the reduction of long-term interest rates (the consequences of Operation Twist) makes investing in the stocks more attractive and promising. The euro still meets certain obstacles on its way and the periphery bond yield remains high. Nevertheless, yesterday we saw some signs of progress. From the FT we learn that Monti is advancing the plan of periphery debt buyback by means of EFSF. Yesterday we also heard messages that the Spanish banking sector can get up to 125bln, as Germany is likely to take a less tough stance. In these circumstances it becomes clear why most central bankers have been abstaining from any significant activity over the last two weeks. The Fed can also follow the same scenario. In other words, we shouldn’t regard Twist as a settled thing. If today’s meeting proves to be disappointing, we may expect the short-term surge of interest in the dollar, however the overall improvement can finally prevail. No matter what results we will see today, we suppose that at the end of the week the euro will be above the current 1.27.
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  2. #102
    Globe Gain is offline Senior Member
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    Default 21/06/2012 Small Twist

    EUR/USD



    The Fed managed to surpass the market expectations. Yesterday the FOMC announced that it would purchase the Treasury securities with remaining maturities of 6 years to 30 years and sell or redeem an equal par value of Treasury securities with remaining maturities of approximately 3 years or less. There is about $267bln of such bonds on the Fed’s balance. The first round of the programme consists in the redemption of 400bln and was to be finished by July. Yesterday’s decision is accounted for by a rather weak economic dynamics over the last few months: job growth has slowed down, spending has shrunk. The paradox is that the slowdown ran parallel with the initial stage of the programme, which, probably, is the best illustration of its effectiveness. On the whole, we can say that the current economic situation depends largely on the business sentiments, which in their turn are also connected with the market dynamics. The programme of substitution of short-term bonds by long-term ones helped to restore confidence for a few months and as a result spurred the growth. Meanwhile, Europe cherished hopes that the debt restructuring would be an effective remedy for the European debt crisis. Due to all that the market dynamics improved greatly and the job growth proved to be really impressive. There is a chance that in the coming months the markets will demonstrate a good growth as well (it won’t be very difficult after the heavy sales in the second quarter). This also carries the potential of the dollar depreciation. Yesterday’s reaction of the market was roughly in this vein. The initial disappointment was followed by new purchases of risky assets; the euro/dollar continued its moderate upward trend. And though this morning the pair fell below 1.27, this drop still was within the established ascending channel. As has already been mentioned, it is not clear yet if this trend will give rise to a continuous wave of growth or will just turn into a bounce after the sharp decline in the previous months. Probably, no one knows this for sure, as too much depends on the behaviour of politicians now.
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  3. #103
    Globe Gain is offline Senior Member
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    Default 22/06/2012 Back to 2009?

    EUR/USD



    The miracle that was awaited by many hasn’t happen. The utterly poor EU Prelim PMI figures that came in yesterday morning deeply upset the market participants. Yet unfortunately it was not the only bad news of the day. According to the Markit PMI data for Germany, the affairs of the local manufacturers are now at their worst since summer 2009. The preliminary PMI figure for June dropped down to just 44.7. France and Euro-Zone in general feel a bit better then forecasted. But we believe that they won’t be able to show better dynamics than Germany for any significant space of time. The thing is that most countries have to carry out budget consolidation. Yesterday we also heard about the job cut in the government sector and also about the intention of some large corporations to launch an austerity drive by means of staff reduction. Today’s business climate data for Germany proved to be a bit surprising. It’s quite normal that the actual figures for June (the decrease down to 105.3) came in much worse than expected (106.1). Nevertheless, the IFO-Current Assessment even rose from 113.3 to 113.9. Is that all about the weak euro? This way or another, the expectations are now much worse. Yesterday we also saw surprisingly poor data on the US housing market. Existing Home Sales have shrunk by 1.5% in May. Looking at the scale of the decrease, we cannot speak about anything serious, but still it somehow cools the ardour about the unshakeable improvement in this sector of the USA. Meanwhile, the Philly Fed Manufacturing Index has also proved to be disappointing. Despite the forecasted growth in June it dropped down to -16.6 against -5.8 a month before. We were wrong when said that the trend would keep upwards. By one powerful movement yesterday most bulls were beheaded. EUR/USD sank below the lows posted at the beginning of the week and at some point even hit the 1.2530 level. For now it looks as though the growth from 1.23 to 1.27 had been a mere correction of the drop from 1.33 and further might be followed by a new wave of sales. Will Europe really fail to come up with something effective to resolve the crisis? If true, it will swallow up even Germany.
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  4. #104
    Sarah Hill is offline Member
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