Pivot: 1.425
Our preference: Long positions above 1.425 with targets @ 1.435 & 1.4425 in extension.
Alternative scenario: Below 1.425 look for further downside with 1.421 & 1.415 as targets.
Comment: the pair has rebounded on its support and is shaping a bullish flag.
Key levels
1.4455
1.4425
1.435
1.4289 last
1.425
1.421
1.415
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ECB Executive Board member Bini-Smaghi said Greece would not receive the next loan package if it does not meet EU/IMF conditions. The Dutch finance minister said additional aid for Greece should be preceded by further reform and privatisations.
Greek opposition leader Samaras said that the party rejects Greece new austerity plan, while Greek Prime Minister Papandreou later said he agrees with some of the opposition's proposals but said broad political consensus is a national imperative.
The German IFO numbers signal that growth has peaked, despite the unchanged headline number. Expectations continue to decline, whereas this was offset by yet another improvement in current conditions. The details of German GDP were not so encouraging, especially following yesterday's weak PMI data. If core numbers from Germany start to disappoint, the euro could suffer some further downside.
Moody's said that Italy and Belgium were also likely to come under pressure if Greece defaults while Portugal and Ireland would be at risk of a multi-notch downgrade. The agency said Spain is not in the same category but would likely still face significant market pressure.
ECB Governing Council member Noyer said Greece has no alternative to implementing the EU-IMF programme "completely and entirely," and must use privatization to cut debt. ECB Executive Board member Stark says all euro creditors are `justified' in expecting their money back.
The euro staged a modest recovery during the Asia session after a failed attempt to break back below 1.40, While Eur/Chf also climbed back, helped higher by some warnings from the SNB about the deflationary risks associated with a stronger Swiss franc, and about its willingness to act if necessary.
Greek Finance Minister Papaconstantinou implied that if Greece does not receive the next quarterly tranche of cash it will be unable to honour its financial obligations. Imagining the likely consequences, he said "the country will halt payments" adding that "wages, pensions - all the state's expenses will not be paid." Papaconstantinou also revealed that the IMF has made it "absolutely clear" that it cannot disburse the next payment without a guarantee that European funding will be made available to Greece next year. This requirement potentially introduces further delay.
Greece announced plans to privatise several state assets. It also revealed its intention to impose fresh fiscal austerity measures designed to save a further 6 bln Euros. Further details are due to be announced next week, and presented to parliament in early June.
Fitch affirmed Belgium's credit rating at AA+ but lowered the outlook to negative from stable, citing heightened political risk. The agency said Belgium would likely be downgraded if it misses official deficit targets.
S&P provided some clarification on its decision to lower the outlook on Italy's rating to negative from stable on Friday. The agency said it does not expect Italy to seek financial assistance from the EU or from the IMF "due to the absence of imbalances". S&P also acknowledged that Italian banks, unlike those in Greece, Ireland, Portugal, or Spain, have made little use of ECB liquidity.
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New York – Citigroup Inc. today announced a 1-for-10 reverse stock split of Citigroup common stock. Citi also announced that it intends to reinstate a quarterly dividend of $0.01 per common share in the second quarter of 2011, following the effective date of the reverse stock split.
"Citi is a fundamentally different company than it was three years ago," said Vikram Pandit, Chief Executive Officer of Citigroup. "The reverse stock split and intention to reinstate a dividend are important steps as we anticipate returning capital to shareholders starting next year."
Citi anticipates the reverse stock split will be effective after the close of trading on May 6, 2011, and that Citi common stock will begin trading on a split adjusted basis on the New York Stock Exchange (NYSE) at the opening of trading on May 9, 2011. When the reverse stock split becomes effective, every ten shares of issued and outstanding Citigroup common stock will be automatically combined into one issued and outstanding share of common stock without any change in the par value per share. This will reduce the number of outstanding shares of Citigroup common stock from approximately 29 billion to approximately 2.9 billion. Citigroup common stock will continue trading on the NYSE under the symbol "C" but will trade under a new CUSIP number.
ECB President Trichet disappointed markets at yesterday's press conference, only noting that the ECB would "closely monitor" developments, and said risks were 'balanced'. As a result, the Eruo declined sharply against the dollar and across the board. A July rate hike is still expected, but investors are now expressing a greater sense of caution. In hindsight, Trichet stressed twice last month that right now he wasn't seeing second round effects in the Euro-zone, which did knock the Euro, and yesterday's stance should not have come as such a surprise. Nevertheless, the ECB will remain more hawkish relative to the Fed and this may continue to support the Euro in the immediate future.
The Yen climbed back above the key 80.00 level during the Asia session without any obvious assistance from the Ministry of Finance. In fact, Economy Minister Yosano reiterated remarks made yesterday by Finance Minister Noda, describing the latest price action as being largely due to dollar weakness rather than yen strength. This suggests some reluctance to intervene at current levels by the BoJ.
The RBA has left the official cash rate on hold at 4.75 per cent, marking a six-month pause in policy tightening (the central bank last raised interest rates in November last year). Economists had expected the RBA to leave rates unchanged, despite stronger-than-expected inflation data for the March quarter.RBA governor Glenn Stevens said the "mildly restrictive" monetary policy stance remained appropriate, but warned that the decline in underlying inflation since 2008 had "run its course".
RBI (Royal Bank of India) in a bid to clamp down on resurgent inflation, in its first monetary policy review of 2012, raised repo and reverse repo rates by 50 basis points. This takes repo (rate at which it lends to banks) to 7.25% and reverse repo (rate at which it borrow) to 6.25%. However the CRR (Cash Reserve Ratio) has been left unchanged at 6%.
For the US Dollar, the boost from Bin Laden’s death was short-lived, coming under pressure again, although even as the Euro rally remains strong, bearish correction is very likely as investors are becoming increasingly worry following the ‘True Finns’ party stance yesterday against Portugal’s bailout, which means a possible hold on the bailout from the EU, that needs the agreement of its 17 member states.
Holidays in most parts of the world have kept markets fairly subdued. The dollar continued to drift lower, after Fed Chairman Bernanke on Friday expressed that there is no time frame for the central bank to exit from policy stimulus. Remarks from Swiss National Bank Governor Hildebrand were hawkish; he said 'certain upside risks are visible' to inflation, and that keeping rates at current levels for too long would entail long-term risks to price stability. Swiss Franc jumped to new record high against dollar after comments from SNB President Hildebrand on inflation. He pledged SNB's commitment to maintain price stability and said the bank "will not hesitate to take all measures necessary to ensure price stability in our country, also in the future".
Today’s data releases is light due to the 1st of May holiday, with main focus on Swiss Retail Sales, followed later in the day by the US ISM Manufacturing PMI.
With Japan on holiday, and the FOMC statement fully digested, the price action during the Asia session was relatively subdued. US real GDP rose at a +1.8% annual rate in Q1, below consensus estimates. However, given Fed Chairman Bernanke's warning that the number could be weak, the US dollar was not excessively affected. The deceleration mainly reflected a slowing of consumer spending growth. In other data, jobless claims jumped, which probably reflected Easter distortions. Chicago PMI and the University of Michigan confidence index are due, but are not likely on their own to halt the dollar's current downtrend.
In Europe, Talks on the proposed program of external assistance for Portugal continue, but have not yet reached a conclusion. There were further headlines from Euro zone officials, denying a Greek debt restructuring. ECB Governing Council member Mersch said the ECB will continue its gradual exit from its non-standard measures at an appropriate pace, and said the ECB never takes measures aimed at supporting banks in one particular country.
The dollar initially strengthened against the EUR and the AUD after the Monetary Authority of Singapore tightened policy by less than expected. However, the dollar's gains were quickly erased at the end of the Asia session when local media sources unofficially released a batch of China data ahead of time. CPI was slightly stronger than expected which raises the risk of further policy tightening. However, new loan growth and retail sales were strong, suggesting little sign of a slowdown in China and helping to boost global risk appetite. The Beige Book and retail sales data helped the dollar briefly. The Beige Book noted the economy is expanding, with widespread gains in February and March along with upbeat reports on the near-term outlook.
In Europe, ECB rhetoric levels seemed to increase over the past 24 hours. Belgium's Central Bank Governor Coene, referring to the recent ECB press conference, said that "Trichet gave a signal that the ECB hike was not a one-off" and it should "not be seen as a totally isolated decision". ECB Executive Board member Stark said that raising short term interest rates would not have much of an effect on economies in the Eurozone's periphery, implying once again that the economic difficulties on the periphery are no obstacle to future hikes. Greek Finance Minister Papaconstantinou said a debt restructuring would shut Greece out of the debt markets for a long time, while German Finance Minister Schaeuble said he is awaiting "a detailed analysis on the debt sustainability of Greece" and that if this report concludes that sustainability is in doubt "something must be done about it."
Sterling weakened yesterday after headline CPI for March came in well below consensus at +4.0% y/y (cons. +4.4%). UK retail sales for March were disappointing, falling by -3.5% y/y (the drop in total sales is the worst since 1995). This is convincing evidence that austerity measures are feeding through into consumer demand. The focus today shifts to the labour sector and jobs figures. ILO unemployment for the three months to February is expected to remain steady at 8.0%. The MPC minutes the coming week will provide further insight on where the debate reached among policy members, but likely the split remains strong with arch dove and arch hawks.
FX price action was relatively subdued during the Asian session, given the lack of news and data flow. New York Fed President Dudley said QE2 is not designed to influence the dollar and the risk of deflation is now "greatly diminished." But until market participants get more clarity on the Fed's next steps, the dollar will be prone to weakness when risk sentiment is positive. It’s safe-haven status could also remain unclear, judging by recent performance vs. the Swiss franc and the yen. Retail sales and the Fed Beige Book are due today.
Bank of Canada is expected to leave the policy rate unchanged at 1% for a 7th month, although the accompanying statement will slightly be more hawkish than the previous one, on signs of rising inflation and strong domestic growth. Its widely speculated that the BoC will resume tightening by June 2011, as now uncertainties in Japan following the natural disasters in March, continued unrest in the Middle east and inflation against appreciation in Canadian dollar have prompted the BoC to stay on the sideline in April.
In Asia, the South Korean Central Bank announced today its decision regarding interest rates, where it decided to keep the rates unchanged at 3%, in line with market expectations. The bank reiterated that high crude oil prices together with the aftermath of the Japanese earthquake will affect the economic growth negatively with rising inflation.
Today’s data focus in Europe will be on the UK’s Trade Balance/Core CPI, followed by German and EU ZEW economic sentiment, while the US session will see the release of the US trade balance and Bank of Canada’s rate statement.
The EURUSD remained steady above the 1.44 level following last week’s ECB rate hike of 25 bp, as widely expected, while the US dollar was unchanged US government shutdown was avoided with the agreement on a deficit consolidation plan. Operations will continue as normal until the end of September although public spending cuts were revised to around $38 bln. US economic calendar contains no major data today, except the speeches of several Fed presidents including Evans, Dudley and Yellen.
In Asia, Machine orders in Japan declined more than expectations during March, indicating that Japanese companies were concerned about the strength of recovery, following the devastating earthquake and Tsunami. The governor of Bank of Japan Shirawaka said that the economy will face a strong downward pressure after the catastrophe due to slowdown in corporate output, while the Bank has committed up to 1 trillion yen in 1 year loans, for the companies affected by this natural disaster.
The ECB hiked the refinance rate by 25bp as expected, but the tone of the press conference was not enough to push market participants' expectations too far in either direction. Although ECB President Trichet did not indicate that yesterday's rate hike was the first in a series, he did once again say that the ECB will act as needed and that interest rates remain exceptionally low. He added that it is paramount to avoid second-round effects and that the ECB will do all in order to ensure price stability. Rate expectations have stayed stable following his comments. Along with stable risk sentiment, this is keeping the euro well supported, where it traded slightly above the 1.4400 mark during the Asian Session.
Eurozone finance ministers are holding an informal meeting in Hungary and they are expected to discuss the pending aid package for Portugal, though a formal request still needs to be extended by Portugal. The meeting should not yield much, as the package will take a couple of weeks to craft, and the press cited a senior EU source saying that the plan will be agreed before the June 5 election. German Deputy Finance Minister Hoyer said that the Portugal decision to take EU aid is right and responsible, and that without the EFSF, Portugal and Eurozone could have been very much at risk.
Portugal formally requested EU assistance following a bill auction that showed borrowing costs continue to rise. Prime Minister Socrates said the country needs help to guarantee its financing needs and the Portuguese opposition leader supported the request for aid. No details were announced but EU officials said the request was "responsible" and would be processed quickly. The ECB's policy announcement is due, where the consensus is a 25bp rate hike. At the ECB press conference due 45 minutes after the policy announcement, it is expected from Trichet to announce a series of rate hikes, a claim he has made during previous meetings. However, his other remarks will be closely followed to see if current market expectations of future rate hikes are justified.
AUDUSD hit a new post-float high of 1.0482 after another stronger-than-expected employment report. Employment in March grew by +37.8k (cons. +24.0k), while the unemployment rate unexpectedly fell to 4.9% (prev. 5.0%). This data has fuelled speculation that the next RBA hike will come in August.
Today’s main focus will be BoE rate announcement, followed by the ECB meeting, while the US session will see the release of Canadian Building Permits and US Unemployment Claims.
Yesterday Portugal's sovereign debt was cut to Baa1 from A3 by Moody's, keeping Portugal on review for further downgrades, citing upward revisions of Portugal's deficit and concerns over fiscal consolidation and structural reform. The euro retreated mildly on the announcement, but remains largely driven by ECB rate hike anticipations for the moment.
The FOMC minutes from the March 15th meeting confirmed what recent Fed speeches have suggested - a mild divergence of opinion is starting to emerge on the FOMC. The FOMC minutes revealed that some members felt the risks to inflation had shifted to the upside, although "almost all" Fed officials saw no need to taper asset purchases as QE2 nears an end. The minutes repeated that the recovery is gaining traction and overall reflected the recent shift in views from several Fed officials in recent weeks.
SNB Governing Board member Danthine again referred to the SNB's current policy issue. He repeated that, if the SNB only had to consider the real estate market and the domestic economy, then it would certainly hike interest rates. But given that different conditions are being experienced by Switzerland's exporters, there is limited scope for monetary policy adjustment. Taking the whole economy (domestic and export) into account, Danthine said the current setting of monetary policy is appropriate.
The yen weakened sharply after a strong earthquake hit Japan. US officials said that earthquake is of 8.8 magnitude, about 400km from Tokyo.
An EU summit is scheduled for today and expectations for any definite actions to emerge from it are low. Any resolution on the pressing issues will likely have to wait for the Eurogroup/Ecofin meetings on March 14-15 and then the next EU summit on March 24-25. Moody’s yesterday downgraded Spain by one notch to AA2 with a negative outlook, which caused a sell-off in Euro. The ratings agency cited concerns over the eventual cost of bank restructuring and structural issue over broader government finances.
Today’s main focus will be the UK PPI in the European session, followed later by the Canada employment data and US retail sales.
FX markets remained tightly range-bound for most of the Asia session, as investors direct their attention to the upcoming ECB press conference. The ECB will likely leave the main refinancing rate unchanged at 1% in March, although delivering a more hawkish tone in the press conference and the accompanying statement. German Chancellor Merkel and Portuguese Prime Minister Socrates met and Socrates reiterated that Portugal does not need external help. Socrates said the March 11 summit aims to boost confidence for market participants and Merkel remained non-committal on possible reductions or alterations to current bailout packages for Ireland and Greece.
In the US, yesterday’s latest Fed Beige Book was a bit more optimistic and the ADP employment data beat consensus, rising +217k in Feb. Fed’s Beige book released yesterday showed all twelve districts reported modest expansion in January and early part of February, with Chicago as the only district that reported slightly weaker conditions. Most districts acknowledged high and rising commodities prices and rising input prices for manufacturers and retailers and there are also plans to passing the costs through to consumers.
The RBA kept policy unchanged, in line with consensus, keeping the cash rate unchanged at 4.75%. The accompanying statement offered little in the way of policy guidance, noting only that the board “judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook”. Australian dollar was mildly lower following the RBA’s decision.
Today’s main focus will be Bank of Canada’s rate decision. Canadian dollar has been strong as supported by recent surge in oil prices. Recent rally extended yesterday after stronger than expected December GDP growth reading of 0.5% mom. It is expected that the bank will likely leave the overnight rate unchanged at 1%.
KUALA LUMPUR, 24 Feb (Bernama) -- Ringgit ditutup rendah berbanding dolar AS pada Khamis apabila situasi pergolakan politik di Timur Tengah dan Afrika Utara kelihatan bertambah memuncak.
Pada 5 petang, mata wang tempatan itu turun kepada 3.0635/0675 daripada 3.0450/0480 pada Rabu.
Seorang peniaga berkata kebimbangan politik mencetuskan permintaan bagi aset selamat dengan franc Swiss menerajui kenaikan pada Khamis.
"Para pelabur kemungkinan menyimpan wang mereka dalam aset yang dianggap selamat untuk mengurangkan pegangan risiko mereka," jelasnya.
Berbanding dolar Singapura, ringgit diniagakan rendah pada 2.3912/3949 daripada 2.3843/3885 pada Rabu dan susut berbanding yen Jepun kepada 3.7384/7437 daripada 3.6829/6883 sebelumnya.
Unit tempatan juga diniagakan rendah berbanding pound British kepada 4.9447/9521 daripada 4.9378/9436 pada Rabu dan lemah berbanding Euro kepada 4.2110/2171 daripada 4.1774/1822 sebelumnya.
23.02.2011
An uneasy calm descended over FX markets during the Asia session, and risk currencies managed to hold their ground despite continuing concerns about Libya while the euro remains supported on expectations of a hawkish ECB press conference next week. The Euro was supported by hawkish comments from the ECB’s Mersch. While his tone was not particularly surprising, comments indicating the possibility of hiking rates with temporary liquidity measures still in place and the specific mention of the March 3 ECB meeting boosted the Euro.
S&P later cautioned that Spain still has significant downside risks to its AA credit rating and could face further problems in obtaining financing in the markets. S&P also said Spain has not done enough to “radically overhaul it’s labor market. ” S&P has the lowest rating on Spain among the three major ratings agencies but the euro nevertheless managed to hold on to some of its earlier gains.
Today’s focus will be on the BoE MPC minutes from the Feb 10 meeting. The minutes are expected to show that debates on whether the bank should start to exit the stimulus problem heat up as inflation jumped.
23.02.2011
An uneasy calm descended over FX markets during the Asia session, and risk currencies managed to hold their ground despite continuing concerns about Libya while the euro remains supported on expectations of a hawkish ECB press conference next week. The Euro was supported by hawkish comments from the ECB’s Mersch. While his tone was not particularly surprising, comments indicating the possibility of hiking rates with temporary liquidity measures still in place and the specific mention of the March 3 ECB meeting boosted the Euro.
S&P later cautioned that Spain still has significant downside risks to its AA credit rating and could face further problems in obtaining financing in the markets. S&P also said Spain has not done enough to “radically overhaul it’s labor market. ” S&P has the lowest rating on Spain among the three major ratings agencies but the euro nevertheless managed to hold on to some of its earlier gains.
Today’s focus will be on the BoE MPC minutes from the Feb 10 meeting. The minutes are expected to show that debates on whether the bank should start to exit the stimulus problem heat up as inflation jumped.
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