Daily GVI Forex Forex View - Greek Bailout Plan Assessed
The Daily Forex View
Greek Bailout Plan Assessed
20:00 GMT- Apr 12 (global-view.com) The EU came to an agreement on Greece over the weekend was not as clear as first thought. The Germans raised some issues over the day indicating that it would take unanimous consent at an EU summit to release any funds to Greece. This view was not supported by other EU members who seemed to feel the deal was done. Deals about Greece have been having a funny way of unraveling. Many traders remain skeptical for the longer term, as the plan only should provide Greece some breathing space in the near term to address its financial problems. Some now have their eyes on various other peripheral E-Z players. Simply put, the bulk of the EZ simply is not competitive at current exchange rates and in one way or another that issue will have to be addressed with a weaker EUR.
The EURUSD is now higher and the EURGBP is up. The GBPUSD is steady. As leaked last Friday the EU came up with a Greek bailout plan over the weekend. but Germany has been raising some key questions about the terms of the deal.
In the U.K., the general election is May 6. The vote has markets waiting every day for new headlines. This goes on for the next three weeks. Although most polls favor the Tories, opinion poll results have been mixed.
We still maintain a cautiously bearish bias for the EURUSD and GBPUSD. The EURGBP is a toss-up.
The EURCHF is up. Some say the SNB has changed tactics and has been in the markets supporting the EUR vs. the CHF much of the time. The recent relentless weakness of the EUR vs. the CHF continues to be a bad omen for the EUR.
The USDJPY pair is steady, and the EURJPY cross is up. The government continues to pressure the Bank of Japan to stimulate growth and favors an easier exchange rate. Some traders have been focused intently on the Japanese vs. U.S. 2-yr note spread (only the U.S. 2-yr moves much).
Chatter that there is a lot of yen waiting in the wings ready to be sold persists. We remain bullish USDJPY, but EURJPY is a tough call. Some say that an expected CNY revaluation would give the JPY a lift, but we would be surprised if the exchange rate is raised by more than a token amount.
The commodity currencies (CAD, AUD and NZD) are mixed. Comments by Canadian Finance Minister Flaherty recently suggest little concern about the strength of the currency. A major focus was the orderliness of recent CAD gains. Friday saw the release of a decent, but disappointing (vs. expectations) employment report. A strong currency eases the pressure from the central bank to tighten policy too early. Oil and gold are up. We continue to favor the AUD and CAD from a fundamental perspective.
Far East equities closed mixed. European bourses are up modestly. U.S. equities are firmer. In U.S. Treasuries, many are watching the psychological 4.00% level in the 10-yr note. The U.S. 10-yr was last 3.84%, -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:The Far East will see Japanese Corporate Goods Prices (wholesale prides) on Tuesday. In Europe, U.K.trade data are due. In North America, Canadian and U.S.trade data employment data are awaited. The U.S.also releases import prices and the weekly API energy report.
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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