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Euro Drops as Greek Debt Talks Resume

thanhlangtu — Sat, 21 Jan 2012 04:21:06 +0000

Euro is dropping, falling from highs not seen for two weeks, as Greek debt talks resume. They’re still working out the details with private bondholders on how to proceed. The euro’s recent rally has been based on the idea of the Greek deal getting done — and continued talks have some Forex traders nervous.

Back in October, private bondholders agreed to a steep haircut in order to help Greece, but many analysts think that even with the concessions from private bondholders the debt will be unsustainable going forward. As a result of some of this uncertainty, a bit of risk aversion is showing through the recent risk appetite.

Euro losses have been somewhat limited, thanks to better economic news in the United States, especially with the jobs data. Additionally, recent eurozone data has been reasonably strong, especially with the recent ZEW readings. However, there is still plenty of downside potential for the euro going forward, especially if the Greek debt problem isn’t resolved. There is still plenty of weakness for the euro, though, and enough uncertainty that the euro is wavering. It will be interesting to see if the eurozone problems are resolved.

At 16:36 GMT EUR/USD is down to 1.2933 from the open at 1.2968. EUR/GBP is down to 0.8327 from the open at 0.8372. EUR/JPY is down to 99.5035 from 100.0150.

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source form: topforexnews

Euro: After a Three Week Rally, Relief Gains are Reaching Their Limit

thanhlangtu — Sat, 29 Oct 2011 06:32:42 +0000

Perhaps the euro’s most daunting fundamental hurdles in months has passed. And, as expected, the reaction was naturally bullish. The EU Summit this past week was a lightning rod for the market’s fears of a global financial crisis spreading uncontrollably with Greece and the Europe at the center of the storm. Naturally, some sense of ‘resolution’ to this imposing concern lightens the burden on the shared currency and global risk appetite trends. However, a big picture view of this situation tells us that the larger issues are far from resolved. More accurately, policy officials have bought themselves time. However, for investors and traders, time equates to an open window to place capital in depressed assets that are carrying yields that were leveraged during the depths of the crisis.

There is a critical difference between a relief rally and a true bull trend. Though we have just recently the market’s drive the fundamentally-troubled euro higher; we have already seen the signs that the market is making the distinction. In a sustainable ‘bull wave’ it is imperative to draw capital in at higher levels to maintain momentum. Yet, to encourage such aggressive investment, there must be a clear view whereby risk diminishes to boost the relative appeal of return or the potential for a European investment yield itself needs to rise dramatically (beyond the possibility of short-term capital gains on a depressed exchange rate). We simply do not have the case for a strong sustainable advance.

The rally has managed a rally against its benchmark counterpart (the US dollar) since the beginning of October. Notably, this is a move that coincides with the climb from the S&P 500. This suggests that a rebound in speculative interests / risk appetite has been the most influential driver to this point. The encouragement that the EU has stemmed the time of a financial crisis through its Summit really didn’t factor in until the EU and banks reached an agreement for a 50 percent writedown on private Greek bond holdings early Thursday morning. Taking a critical view of the three point approach that was agreed to; the writedown is the only factor that is immediately actionable – and even believable.

For an increasingly skeptical market (there have been many efforts at a rescue before this), the fact that the EFSF is expected to be leveraged by 4 times (to approximately 1 trillion euros) comes into question when we consider the lack of details and the inherent risk in using a bailout program. Furthermore, the bank recapitalization scheme sets an aggressive 9 percent core tier one capital ratio; but the 106 billion euro expected funding need smacks of an underestimate akin to past Stress Tests and forcing the banks to ask a skeptical market first is an unfavorable confidence vote that could stir fear once again. We may find more details next week to their process and approach when the G20 meets in Cannes, France Thursday and Friday; but we won’t likely receive serious details until the November 8th Summit.

We will fully be concentration this coming week on risk appetite trends for euro guidance. Should the October rally that has carried sentiment for the fundamentally-troubled and speculatively-depressed alike falter, the Euro’s heavy risk going forward could easily swamp the measured return potential for the currency and its assets. Potentially cutting the return factor even further, we have the ECB rate decision on Thursday. The economist and market consensus is for no change under new President Mario Draghi; but there is a small contingent calling for a cut. After the efforts made this past week on the fiscal front, it is not so far-fetched to see a cut. A reduction is not priced in; and that creates a serious ‘fat tail’ situation. An interesting question though: could a cut be seen as encouraging?

source from: dailyfx

Euro Falls 1% below $1.5 as Stocks Stumble

admin — Fri, 27 Nov 2009 14:20:07 +0000

The European currency declined sharply in holiday-thinned trade on Thursday as renewed risk aversion prompted investors to shed riskier assets. The EUR hovered near the day’s low of $1.4960 down 1.1% on the day. The currency also hit a near 2-month low against the Japanese yen at 129.52 yen.

The EUR extended losses as ratings agency Standard & Poor’s put the credit ratings of four Dubai banks on negative outlook and stock market losses reached 3%. The negative outlook for the banks is due to their exposure to Dubai World, which is seeking a debt standstill. The Dubai World story has weighed heavily on stocks all day, prompting traders to cut back their dollar-funded positions.

The British pound trimmed early losses but remained 1.4% lower versus the U.S dollar at $1.64. The Sterling also slid 0.4% vs. the EUR to 90.93 pence. Concerns about U.K. bank exposure to Dubai weighed on the Pound, analysts said. There are concerns with regard to the extent of the U.K. banking sector exposure in Dubai so that is weighing on sterling. The underlying picture for Sterling was already fundamentally weak and this news adds further to the bearish sentiment.

source: forexyard.com