20:00 GMT- Apr 6 (global-view.com) Forex markets were back in full force today amid a number of key developments 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. The Greek Finance Minister denied the story. 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, U.S. data had come in stronger than expected after the March employment data last Friday
The latest FOMC minutes were released mid-afternoon in N.Y. Bottom line, it seemed the central bank wants to get out of the extended period language straight-jacket. If they were considering hiking rates at the September Fed meeting they would have to change their language later this month. We would not read too much more in the notes.
The EURUSD is weak and the EURGBP is down. The GBPUSD has fallen as well. Europe is back at risk following a a wire report that the Greek bailout plan of the EU is in doubt. The story goes that Greece is balking at IMF restrictions. We would like to have seen this story confirmed elsewhere. There was chatter early that EU central banks had been buying EUR in Asia today. This talk was never confirmed either. In the U.K., PM Gordon Brown formally called for a general election on May 6. Polls have been mixed. One poll result over the weekend suggested a 20 seat majority for the Conservatives after the vote. This would be seen as GBP constructive. In the meantime, the unit is vulnerable to the next headline.
The EURCHF is steady. The SNB surprised the market last Thursday after 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 modestly lower, and the EURJPY cross is down sharply. Tokyo had been successfully steering the JPY lower recently, and we don't see that trend ending soon. Reportedly, there is an overhang of long JPY positions (vs. the USD and EUR) that have to be unwound. There are reports that corporations are over hedged currencies based on overly optimistic foreign revenue projections. JPY strength today is seen to be a correction as selling had gotten ahead of itself.
.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 mixed. Far East equities were mixed. European bourses closed mixed. U.S. equities are mixed as well. 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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