10:00 GMT- Apr 6 (global-view.com) Forex markets are back in full force today and are very active with a number of key developments seen overnight. It appears that the Greek debt bailout plan might be falling apart, as Greece has become unhappy with the prospect of the IMF policing its finances. Many had felt this issue had been put to bed, but clearly it has not. As noted yesterday,USD sentiment had already been developing positively on its own. On Monday, the ISM Services PMI and Pending Homes data had both come in stronger than expected. Also the March employment data last Friday were a constructive influence. Also the Reserve Bank of Australia raised rates by 25bps today.
The EURUSD is lower and the EURGBP is down. The GBPUSD is down. Europe is suddenly at risk with the Greek bailout plan is doubt. There has been chatter that EU central banks had been buying EU in Asia today. In the U.K., PM Gordon Brown is expected shortly to call a general election for May 6. Polls released over the weekend suggested a 20 seat majority for the Conservatives after the vote. This would be seen as GBP constructive.
The EURCHF is steady. The SNB surprised the market last Thursday when the EURCHF tumbled to new record lows. The central bank intervened not only in the EURCHF cross but in the dollar legs of that relationship as well. The chronic weakness of the EUR vs. the CHF continues to be a bad omen for the EUR.
The USDJPY pair is lower, and the EURJPY cross is down sharply. Tokyo had been successfully steering the JPY lower recently. Reportedly, there is an overhang of long JPY hedges (vs. the USD and EUR) that have to be unwound. There have been reports that corporations are over hedged currencies based on overly optimistic foreign revenue projections. Some say the JPY selling had gotten ahead of it self and had to correct.
The risk trades continue to send mixed signals.The commodity currencies (CAD, AUD and NZD) are mixed. The Reserve Bank of Australia raised its cash rate target by 25bps to 4.25% today. After recent disappointing Australian data, economists had become split on whether a rate hike was still probable today. Oil and gold are lower. Far East equities were mixed. Most European bourses are up. U.S. equities are down. In U.S. Treasuries, the focus is on the 10-yr note and the psychological 4.00% level. The U.S. 10-yr was last 3.96%, -4 bps. Bonds are a counter to risk trades because risk investments must somehow be financed. When the cost of money moves up (higher interest rates), the return and allure of risk trades falls.
UPCOMING DATA HIGHLIGHTS:Far East markets on Tuesday will see the Reserve Bank of Australiapolicy decision. Also Japanese leading indicators are due. In Europe, Swiss CPI data are slated. In North America, the U.S.markets will conduct a three year auction, the latest Fed policy meeting minutes are due, and weekly API data will be released..
See ECONOMIC CALENDAR for a complete list of future forex market events and consensus data estimates. Go to the forex forum for up-to-date market developments and technical trading ideas.
John M. Bland is an author, and co-founder and partner of Global-View.com in 1996. Before that, he was a Vice-President and senior dealer in the fx inter-bank and futures trading arm of the Continental Grain Company in NYC. Previous to that, he was an early member of the Chemical Bank (NYC) corporate advisory service. He also worked in international liability management. John has an MBA from the Hass School at the University of California at Berkeley and a bachelors degree in International Economics from Berkeley.
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