ÔÉėGreek deficit for 2009 even higher than previously announced
ÔÉėPapandreou asks for rescue plan to be activated
ÔÉėFOMC unlikely to signal turnaround in interest rate policy
Greece requests aid
The Greek debt crisis and fears of increasing sovereign debt problems in other eurozone countries weighed on the euro again this week. EURUSD in particular slipped temporarily to 1.32, the lower end of the trading range of the last two and a half months. At the end of the week, however, after surprisingly upbeat economic data, and the announcement that the Greek government had officially requested aid, EUR-USD is around 1.33 again, still about 1.7% below last week‚Äôs level.
Eurostat has revised Greece‚Äôs budget deficit for 2009 from 12.7% to at least 13.6% of GDP. Moreover, Moody‚Äôs has downgraded Greece‚Äôs rating from A2 to A3. The even greater budget gap makes Greece‚Äôs stability programme, which is aiming to cut the deficit to 8.5% this year, appear even more ambitious. Implementing additional austerity measures would probably prove difficult: the measures unveiled so far have already prompted strike action. Furthermore, an even tighter fiscal policy could exacerbate the recession, which would not help to cut the deficit.
Greece‚Äôs dilemma has been deepening because of the surge in interest rates. Prices of bonds with shorter maturities plummeted dramatically this week. This reflects investors‚Äô fears of an impending default or debt restructuring, even though the Greek finance minister George Papaconstantinou has shrugged off this possibility as being absurd. On Thursday, yields on 2-year bonds were over 10%, compared with 6.75% at the end of last week. 10-year yields jumped to 8.8% at times; thus spreads between 10-year Greek bonds and the equivalent German Bunds hit a new record of over 560 basis points. There is growing concern about contagion from Greece spreading to other eurozone countries: yield spreads between 10- year German and Portuguese government bonds, for example, climbed to a 13-month high.
Due to the sharp increase in the cost of financing on financial markets, the Greek prime minister George Papandreou officially requested aid from European governments and the International Monetary Fund (IMF) at on Friday. There is no time to be lost: Greece must find ‚ā¨11bn for maturing bonds by the middle of May.
The fact that Greece is now asking for the rescue plan to be activated is allaying fears of the debt crisis spreading to other eurozone countries and the monetary union breaking up, and is thus easing pressure on the euro. Before the rescue plan takes effect, however, governments of the member states must decide on bilateral loans. The French government has already drawn up a draft bill and earmarked ‚ā¨3.9bn, over 60% of France‚Äôs maximum contribution. If all member states provided about 60% of their respective maximum contributions, the total for the whole of the eurozone would be about ‚ā¨18.5bn. Together with the IMF loan, which the German minister of economics Rainer Br√ľderle estimates at ‚ā¨12bn, this would more or less cover the amount needed by Greece for 2010. However, it is still unclear whether this will in fact suffice. The rescue plan agreed at the end of March envisages bilateral loans of up to ‚ā¨30bn for this year and additional IMF loans of ‚ā¨15bn. The extent of potential financial aid necessary in the following years is not yet known.
In Germany, the legal procedure for bilateral loans has not yet been agreed. But the government will now hardly be able to postpone voting on the unpopular aid until after the election in the state of North Rhine Westphalia on 9 May. According to finance minister Wolfgang Sch√§uble, voluntary aid would conform with the Constitution, as the no-bailout clause in the Lisbon Treaty only prohibits member states from being liable for the commitment of other states. He said it was in Germany‚Äôs interests to stop the Greek debt crisis from escalating.
If loans, on which interest rates of about 5% would be charged, were not granted, Greece would probably become insolvent. This is not an option: if its debts were restructured, German credit institutions, which hold Greek government bonds to the tune of around ‚ā¨40bn in their portfolios, would have to take massive write-downs. This would cause capital base constraints, which would tighten lending further, and the banking crisis could flare up again.
This would jeopardize the German recovery, which just seems to be gathering pace in the second quarter. This week, for instance, the ZEW expectations rose by 8.5 points, and are now almost twice as high as their historical average. The Ifo business climate leapt from 98.2 to 101.6, mainly because current assessment had risen sharply. Expectations continued to improve too and are nearing their all-time high. Other climate indicators in the euro area were also quite upbeat. Nevertheless, according to the latest IMF World Economic Outlook, disparity between the US and the eurozone is widening: for the eurozone, the IMF is still predicting growth of 1% in 2010, and it has reduced its forecast for 2011 marginally to 1.5%. However, the US forecast for 2010 has been lifted by 0.4 points to 3.1% and for 2011 by 0.2 points to 2.6%.
Despite the brighter US economic outlook, the FOMC is not likely to signal that it will abandon its zero interest rate policy in the foreseeable future. In the minutes of the last meeting, some committee members had already warned against raising interest rates prematurely, particularly because of the risk that core inflation could drop more sharply than was desired. Therefore, the phrase ‚Äúextraordinarily low rates for an extended period‚ÄĚ is likely to be maintained.
Nevertheless, the dollar could remain well supported next week, and not just because of the ongoing problems in the eurozone: US GDP data for Q1 will show that this time the main driver of growth in the US was not inventories but private consumption.
Peter Meister +49 69 718-2600
+49 69 718-3642
Foreign Exchange Trading
+49 69 718-2695
Matthias Grabbe / Klaus N√§fken
+49 69 718-2688
This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHF-BANK Group") solely for the information of its clients. The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities. This publication must not be distributed in the United States.
All rights reserved. Please mention source when quoting from it.
Forex Trading News
Daily Forex Market News Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Forex News Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Elevate Your Trading With The Amazing Trader!
The Amazing Trader includes:
Actionable trading levels delivered to YOUR charts in real-time.
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.