EU Morning Report – Risk aversion prevails on Moody’s downgrades

Here are the latest Financial News:

Risk Aversion prevails as Moody’s downgrades Greek sovereign debt and states that the UK and the US is testing the boundaries of their Aaa status.

• The US dollar and the Japanese Yen strengthened all day yesterday and the momentum followed through in to the Asian session. Risk aversion seemed to be the main driver behind the moves and not interest rate differentials. Moody’s, a rating agency, issued a report downgrading Greece’s sovereign debt and also said that the sovereign rating of US and UK are testing the boundaries of their ”Aaa” status. Moody’s also downgraded several Dubai Government Related entities. The USDJPY price action yesterday was between 89.15 – 88.15.
• Greece has informed the EU group of finance ministers saying that it is determined to restore its public finances; however Greece stated that a difficult situation in one Euro zone country is a matter for concern for the Euro Zone as a whole. We are likely to see plenty of political haggling over this in the coming weeks and as a consequence we may see the EUR and Greek Government Bonds vulnerable to the tone of the ECB and the Euro Group finance ministers. The EURUSD yesterday traded between 1.4866 – 1.4670
• The GBPUSD also suffered some losses yesterday again on the back of Moody’s report calling UK sovereign debt as ”resilient” as opposed to ”resistance”. The GBPUSD was also weighed down by disappointing industrial and manufacturing reports. Investors are concerned about the fiscal health of the UK and are highly anticipating the pre budget release by the UK Chancellor Alistair Darling to gain some clarity over the situation. The GBPUSD price action yesterday was between 1.6480 – 1.6220.
• Also worse mentioning the Bank of Canada kept interest rates unchanged yesterday at 0.25% which was widely expected by the market Governor Carney also reiterated that the BoC is committed to keeping rates unchanged at least until Q2 of 2010. The USDCAD traded between 1.0490 – 1.0670!
• Today the main event to look out for is the pre budget report by Alistair Darling which will have crucial key proposals by the Chancellor so as to address the largest UK deficit since war time. There will also be a number of bond auctions today by the US, Germany and Canada which can offer us a glimpse in to the current appetite by the market for government bonds as well. We will have CPI inflation data out of Germany plus Trade balance figures by Germany and the United Kingdom. In the Asian session will we have the all important RBNZ Rate call expected to keep rates unchanged at 2.5%.

Currency to watch out for:  EURUSD & GBPUSD

• The EURUSD pivot point is at 1.4800 with a preference to enter into short positions at 1.4790
• The GBPUSD pivot point is at 1.6325 with a preference to enter into short positions at 1.6315

Today’s calendar and market movers:

• Germany Consumer price Index for November % expected to come in at -0.2 from a previous reading of 0.1
• Germany Trade Balance October expected to come in at EUR10.7bln from a previous reading of EUR9.9bln
• United Kingdom Trade balance for October expected to come in at GBP-6.85 from a previous reading of GBP-7.19bln
• New Zealand Reserve Bank of New Zealand Rate call for December expected to remain unchanged at 2.5%

Now onto Stocks: 

• Equity markets in the US closed the session in the red at -1.00% for the DJIA, following Moody’s sovereign debt ratings. European equity markets closed the session negative overall with the DAX -1.66% the CAC -1.43% and the FTSE -1.65%. And in the Asian equity markets we see the NIKEI225 trading at -1.34% and the HSI at -1.03% at the time of writing

My recommended Forex Broker is Forex Yard.

EU Morning Report – Ben Bernanke stalls the broad USD rally

Here are the latest Financial News:

Ben Bernanke stalls the broad USD rally, Dubai woes still pestering the Currency markets!

• Yesterday during the European session we saw Dollar strength continue on the back of the positive payrolls data from Friday which sparked a shift of focus by market participants. The shift is away from the risk on risk off equity/us dollar correlation and towards a more fundamental view on interest rate expectations and US dollar. The new paradigm looks to buy USD on good fundamental data as hopes for interest hikes rise and vice versa.
• During the US session Ben Bernanke, the Federal reserve Chairman, made a speech to the Economic Club of Washington in which he disappointed market participant by highlighting that ‘’significant headwinds to growth” remain and that the Fed can tighten but the timing still remains a big question, the ”lower for longer” policy remains in place. The price action for the EURUSD yesterday was between 1.4900 and 1.4760 and the USDJPY traded between 90.00 89.00.
• Jean Claud Trichet also was speaking yesterday and his statements followed through to what he said last Thursday following the ECB rate decision. He highlighted that interest rates are appropriate and that exit from current policies must be timely and gradual. He also talked about a need for a strong dollar and also said that we must be cautious in regards to future bank write downs within the Euro Zone.
• The Sterling had a bad session yesterday with the Dubai debt problems still haunting the currency. The direct issue here is that Dubai has large financial stakes in UK Assets which it may be forced to sell and also that 2 large UK banks have large exposures to the actual debt of Dubai world. So current GBP price action is in tune to the hope and fear cycles around the Dubai Debt saga. The GBPUSD traded yesterday between 1.6515 – 1.6315 and the EURGBP between 0.9065 – 0.9000.
• Today Japan announced another 7.2 Trillion Yen ($81bln) stimulus package as it faces deflation risks and a very fragile economic recovery, the delay in the stimulus package was down to Politics and disagreements within the coalition government. Also today we will have the Bank of Canada rate decision widely expected to remain unchanged at 0.25% with much focus on the following statements.  

Currency to watch out for:  EURUSD & USDJPY

• The EURUSD pivot point is at 1.4900 with a preference to enter into short positions at 1.4890
• The USDJPY pivot point is at 89.75 with a preference to enter into short positions at 89.70

Today’s calendar and market movers:

• UK Industrial Orders for October % expected to come in at 0.4 from a previous reading of 1.6
• Canada Housing Starts November expected to come in at 159.5k from a previous reading of 157.3k
• Canada Rate Decision expected to remain unchanged at 0.25% for the month of December
• US IBD Economic Optimism for December is also due today with a previous reading of 47.9

Now onto Stocks: 

• Equity markets in the US closed the session almost unchanged at +0.01% for the DJIA, following Bernanke’s statements yesterday. European equity markets closed the session negative overall with the DAX -0.57% the CAC -0.17% and the FTSE -0.22%. And in the Asian equity markets we see the NIKEI225 trading at -0.27% and the HSI at -0.26% at the time of writing

My recommended Forex Broker is Forex Yard.

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