Forex Blog

May 18, 2012

Week in FX Europe May 13-18

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 11:15 am

The collapse of efforts to form a Greek government this week has reinforced, for many, the bullish outlook for the big dollar. The run-up to Greek parliamentary elections on June 17 will be marked by continued concerns about a disorderly exit from monetary union. The market currently sees contagion fears making inroads with other periphery economies. Moody’s downgraded sixteen Spanish banks by one to three notches and they still have another eleven EU members to vet by next month. The market seems comfortable shorting currencies geared to euro area growth as data is consistently signaling weaker activity in Q2. Expect the latest round of financial stress to further damage business confidence with the core economies.

Below are some other highlights of the week:


EUROPE

  • Market sentiment continued this week where it left off in risk aversion mode. Fears of a disorderly Greek default and EMU exit remain the main source of market stress. The negotiating of a grand coalition was unsuccessful as the country now heads towards a June election.
  • GER: Chancellor Merkel’s CDU party lost more vote share in North Rhine-Westphalia, with the SPD increasing its control of that state. The sitting Chancellor looks under pressure to win next year’s election.
  • EU: Mainland data continues to point to a significant deterioration across the euro-zone. EZ IP fell -0.3%, m/m, much worse than the consensus for a +0.4% rise. Not surprisingly, the weakness came from a sharp contraction in energy production after weather related strength in Q1.Analyst’s continue to point to the weak PMI’s which convey a worrying growth outlook in the euro-zone going into Q4.
  • GER: German economic expectations have fallen somewhat aggressively this month after rising for five consecutive releases (10.8 vs. 23.4). It obviously reflects the shenanigans occurring in Greece and the French political results. Collectively, both situations seem to be raising doubts about the commitment from some European Governments to fight the periphery regions debt crisis.
  • EU: Overall, euro-zone GDP was flat in Q1 according to the flash estimate, better than the consensus expectation for a -0.2%, q/q, contraction. German growth surprised to the upside, rising +0.5%, q/q. Positive German contributions came from domestic consumption and net trade, while investment decreased. Both Dutch and French GDP did not deviate too far from flat. However, in the periphery, the news was less good. The Italian economy appears in a deeper recession with a -0.8% contraction in Q1, while Greece was down -6.2%, y/y and the surprise was Portugal’s GDP falling only -0.1%, q/q. The market seems to believe that the weak peripheral should trump the better news in the core in terms of EUR impact. Will the ECB set policy to maintain peripheral stability?
  • GER: Despite being government less, Greece paid the +€430m international bond maturing this week, hoping obviously not to aggravate sentiment given current delicate conditions and be seen as a new trigger for systemic pressures.
  • CE3: Their economies reported very weak GDP numbers. CZK GDP contracted -1.0%, q/q, after the country entered a technical recession in the past quarter. This should support the doves thinking. Elsewhere, HUF’s GDP contracted -1.3%, q/q, much worse than the expectations for -0.5%qoq. Expect renewed concerns in mainland Europe and weak growth outlooks to affect the CE3 further.
  • GRD: Greek political leaders fail to build a coalition. A caretaker government will oversee next month’s election.
  • EU: Merkel and new French President Hollande indicate that they would consider measures to spur economic growth in Greece, as long as voters there commit to the austerity demanded for Greece to stay in the euro.
  • GBP: The tone of the BoE latest inflation report was very dovish relative to the hawkish set of minutes. Based on market interest rates and current size of asset purchases, inflation is projected to be below the +2% target at the end of the forecast horizon. Governor King indicated that the will respond if the euro crisis escalates. Are more AP’s on the horizon? Will sterling outperform the EUR and other growth sensitive currencies as a safe haven?
  • UK: Jobless claims fell -13.7k last month, while March jobless claims were revised to -5.4k from +3.6k previously. These are first falls in job claims in over a year. The ILO unemployment rate fell to +8.2% for Q1 vs. +8.4%. Since Q4, the UK economy has managed to create +165k jobs. Is the UK economy in that much of a technical recession?
  • EU: Euro-zone inflation was +2.6%, y/y, in April, unrevised from the preliminary estimate and slightly down from +2.7% in March. Core-inflation was stable at +1.6%, y/y.
  • EU: The ECB announced that they will not lend any more to several Greek banks until their recapitalization is complete, combined with the announcement of new Greek elections for 17 June, happen to offset the overall positive outcome of Spain’s mid-week bond auctions. Spain issued €2.5b to reasonably strong demand.
  • GR: Anagiotis Pikrammenos, the head of Greece’s Council of State, will head the caretaker government into next month’s elections.
  • EU: Moody’s downgraded Spanish banks on rising loan defaults, a renewed recession, restricted funding access and the reduced ability of the government to support lenders.
  • ITL: Following large falls in the previous two months, Italian industrial orders rose +3.5%, m/m, in March, handily beating market expectations.

Loonie the first to hike?

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 11:14 am

Canada looks like a safe bet to be the first amongst the G8 members to hike rates. Last month’s inflation figures were a tad stronger than expected, topping Governor Carney’s +2% inflation target. Despite the small breach, no CBank in this stuttering economic environment would be rushing to raise rates. Canada’s outperforming metrics, employment, housing and manufacturing data still have to combat specific external headwinds that scream for extending domestic accommodative policies. The BoC has been very vocal about being adequately ‘flexible’ in its inflation target mandate. The timing of any hike will be ‘weighed carefully against domestic and global economic developments.’ Currently, risk aversion has not been kind to the loonie.

Below are some other highlights of the week:


AMERICAS

  • USD: US consumer prices were flat last month (+0.3% vs. +0.3%), ending three-months of price increases as falling gas costs kept inflation at bay. Core-prices have risen +0.2%, m/m, and +2.3%, y/y. The annual rate for the overall and core continue to hover above the Fed’s+2% target. Despite falling gas prices easing overall inflation, rising core could limit the Fed’s ability to stimulate the US economy further, even by additional bond buying.
  • USD: Retail sales grew just +0.1% headline and ex-autos, below market expectations of +0.2%. Analysts note the sales print is to some extent a payback after a strong Q1 gain. Last month saw a particular weakness in building materials and gas station receipts on the back of weaker gas prices.
  • USD: NY Empire State manufacturing rebounded this month. The business conditions index rallied to 17.09 after falling 14 points to 6.56 in April. Most of the sub-indexes improved like new orders, shipment, labor conditions and the employment index. However, price measures eased this month as did optimism about the future.
  • USD: Housing starts beat expectations, rising to +717k vs. +680k. On the flip side building permits dropped back down from +769k to +715k after March’s +62k surge. It remains the second highest monthly reading in just under four-years.
  • USD: IP rebounded last month, jumping +1.1%, m/m, further proof of a healthy demand for factory goods. Other data showed that US Capacity utilization also rose to +79.2% from a revised +78.4%. Big picture however, operating rates remain below their long-run average, just above +80%.
  • CAD: March Canadian manufacturing shipments gained +1.9%, beating expectations of a +0.4% monthly rise. The gain was led by an increase in sales from petroleum and coal products.
  • USD: The weekly EIA reported crude inventories were up +2.1m barrels just above weekly expectations of +1.5m.
  • CAD: Foreigners reduced their Canadian security holding for the second consecutive month (-$2b). On the flip side, Canadians bought the largest amount of foreign product in five-years last month (+$6.3b, with US equities accounting for +60%).
  • CAD: Canadian manufacturing shipments rallied in March, up +1.9% vs. +0.4% expectations.
  • CAD: Wholesale trade climbed +0.4% to +$49b in March, mostly on the back of motor vehicles and the parts sector. Sales volumes were also unchanged on the month.
  • CAD: BoC quarterly review stated that “delay or front loading of fiscal consolidation may cut global GDP 7-8% by 2015. Monetary policy may be needed to support financial stability in exceptional circumstances” In translation, Governor Carney has little concern for the Euro meltdown and is flexible for liquidity injections if required.
  • USD: Level of US initial jobless claims remained unchanged, w/w, at a seasonally adjusted level of +370k. The four-week moving average falls to the lowest level in more than a month (-4.7k to +375k). The data suggests that last month’s spike is likely due to seasonal factors. The May employment report is likely to confirm the slower trend in hiring that emerged in March.
  • USD: The Conference board’s leading economic indicators index slid -0.1% last month, the first drop in eight-months. Negative contributions came from last month’s contraction in building permits and a jump in initial claims. The broad softness in this month’s data implies weak growth in the latter half of Q2.
  • USD: Philly Fed truly disappointed and missed all market expectations, falling from +8.5 to -5.8, the worst print in eight month. The negatives came from new orders, a big plunge in the employment and the future activity index.
  • CAD: Canadian April CPI (nsa) +0.4%, m/m and +2%, y/y; core +0.4% and +2.1% y/y. The market was looking for a headline print of +0.3% and +0.2% respectively. This has the hawks wondering when Governor Carney will pull the trigger. Despite probably being the first G8 country that is going to actually hike rates, the market is beginning to price in no hike this year after a disappointing Canadian GDP print in February, and because of the continued euro-zone turmoil.

EUR’s to be Recycled

Filed under: OANDA News — Tags: , , , , , , , , , , , — admin @ 4:35 am

The third largest IPO in corporate history, the largest in tech, is about to make a few specs very wealthy today. Frantic Facebook Friday’s enthusiasm does not seem to be spilling over to disrupt the dower mood of FX. The 50% of Americans who believe that Facebook is a fad, will not be allowed to gatecrash today’s party. The EUR bull thought they caught a break with yesterday’s dismal US data potentially opening the Q3 flood gates. That euphoric feeling has been short lived, flames finally doused by rabid credit agency action in the overnight session. Currently, there are no noticeable peripheral spread narrowing to support this equity led risk rally.

Moody’s has been kept busy in the overnight session, downgrading 16 Spanish banks by one to three notches, with ten of the institutions left on negative outlook. Without going into too much detail, the downgrades reflect each bank’s operating conditions, rapid asset quality deterioration (long too many holiday homes on their books), funding concerns and finally, each entities creditworthiness of the Spanish sovereign. This final point is probably the most significant, analysts note that it affects the ability of the government to support banks. Moody’s is currently Euro country hopping, and this will not be the last of the European banks to be downgraded in this cycle.They have eleven more EU member announcements to handle before the end of next month. Not to be left in the cold, Fitch cut Greek long-term sovereign rating to CCC from B-, bringing its rating in line with S&P’s.

The Greek radicals under Tsipras believe they still have the hammer over the rest of the Europe, presuming that fellow members will not roll the dice and cut off funding to his country. His party believes a financial collapse in Greece would drag his compatriots down as well. Obviously quoting Hollande visions, Europe must consider more growth oriented policies for his homeland. Coming back to the “EUR” reality, there is no alternative for Greece, she must stick to the deal that has been agreed. Other Euro policy makers concur that this is the country’s only rational option. It’s no wonder that contingency plans are being drawn up in case Greece were to exit the Euro-zone. Their woes reinforce the dollar bull views that the single currency will struggle to make it back above 1.30 even if the polls start to signal a greater chance of a pro-EMU composition of the Greek parliament. Any Greek coalitions will still have to face a difficult negotiation on a modified austerity plan. The thought of an ECB easing, to promote growth, does not strengthen the currency either!

may 18 pos

The position ratios continue to show that the market has been quietly gathering EUR’s ahead of this years low print of 1.2624. The EUR bears are happy to pare some of their ‘one directional’ trade positions to at least recycle said funds. There are a few significant strikes occurring today. The larger sizes will only increase short term spot gravitation of certain levels (specifically, 1.27 and 1.2725). Single currency supply is expected to be on hand as the market approaches 1.2750. The longer term focus still remains fixated on breaching the psychological 1.26 barrier below. It will not be unusual for the markets to see the EUR rally intraday, cutting some of the record short positions ahead of this weekends G8 meetings. It’s always prudent to play the percentages in case of event risk. Obviously counteracting this will be the possibility of fresh Euro negative news occurring during the weekend from any embattled member. The trend remains your friend and having cash to recycle also feels good!

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May 16, 2012

BoE Sees Inflation and Weaker Growth In UK

Filed under: OANDA News — Tags: , , , , , , , , , , — admin @ 4:58 am

The Bank of England (BoE) said in its report today that the UK’s inflation is likely to remain above its 2 percent target for at least another year, while growth will be subdued and vulnerable to the euro zone debt crisis. The central bank sees inflation at about 1.6 percent in two years time.

The Bank’s forecasts represent a much slower fall in inflation than it predicted back in February as well as a weaker growth outlook. It said that the UK growth is likely to remain subdued in the near term, due to the government’s fiscal squeeze, the pace of the global economy and tighter credit conditions. The euro zone debt crisis remains the biggest threat to Britain.

Reports this month indicated that UK manufacturing and services weakened in April after the economy shrank 0.2 percent in the first quarter.

Britain’s economy suffered its biggest contraction since the 1930s in the wake of the 2008 financial crisis, and had recovered less than half the output lost before it slipped back into recession at the end of 2011. The BoE said that total GDP would not get back to its pre-crisis level before 2014.

On a positive side, the UK’s jobless rate decreased slightly to 8.2 percent in March, pointing to some underlying resilience in the economy. According to the Office for National Statistics, the number of Britons without a job fell by 45,000 in the three months to March to 2.625 million.

The BoE held its key rate at a record low of 0.5 percent in May and kept its bond-purchase target at 325 billion pounds. Many economists do not expect further quantitative easing in the immediate future, but this could change if the conditions in the euro zone deteriorate. The Bank said that despite the changes in the near term outlook, the fundamental policy remained the same.

Sources: Bloomberg and Reuters

May 15, 2012

Germany Is Holding Up The Euro Zone Economy

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 5:13 am

Germany helped the euro zone avoid its second recession in three years, as growth in the region’s largest economy offset contraction in other euro zone member countries.

German gross domestic product (GDP) rose 0.5 percent from the fourth quarter of 2011, when it fell 0.2 percent. Growth was mainly driven by net trade, as exports rose and domestic consumption increased, while investment declined.

In the meantime, according to a report published by the European Union’s statistics office, GDP in the 17-nation euro area stagnated in the latest quarter compared with the prior three months as a result of the continuing debt crisis.

Eight euro zone nations are already in a recession, commonly defined as two consecutive quarters of contraction. Italy’s economy shrank 0.8 percent in the quarter, while the Netherlands saw a decline of a 0.2 percent, and Portugal decreased by 0.1 percent. France, the region’s second-biggest economy, avoided contraction, recording zero growth in the first quarter.

In Eastern Europe, Hungary is heading towards a recession. The Hungarian economy contracted 1.3 percent from the previous three months after stagnating in the fourth quarter of 2011. Czech GDP shrank 1 percent, which indicates the third consecutive quarter of contraction, and Romania recorded the second quarter of decline with a 0.1 percent drop.

The economies of Greece, Italy, Spain, Portugal and the Netherlands are all projected to shrink in 2012, with Spain the only euro member seen remaining in contraction into 2013.

An escalation of the sovereign-debt crisis is the biggest risk to the euro zone outlook, according to the European Commission. The region’s GDP will probably drop 0.3 percent this year before increasing 1 percent in 2013.

Source: Bloomberg

May 14, 2012

EUR: No Bounce, No Lift, Why Own?

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 4:37 am

This EUR move is consistent, persistent and now has those individuals who last week managed to get themselves long, second guessing. Investors remain nervous as last ditch Greek coalition talks over the weekend broke down. To some it’s rational, others irrational, however, whatever is said, in the big picture, investors are scurrying to the sidelines, selling riskier assets and beginning to hoard those record low yielding bonds and bunds.

Risk assets have gotten little support from China’s RRR cuts over the weekend. Instead, investors prefer to hone in on Greece’s inability to govern itself and to the poor showing by Merkel’s Christian Democratic party in regional elections yesterday. The electorate has clearly rejected her austerity policies, which raises doubts about her staying in power next year. The build in EUR pressure stems from the uncertainty over how much contagion Greece’s exit from the euro-zone would cause and how much damage it would do to the “cohesion of the euro system as a whole.” Various Central Bank comments that a Greek exit “can be managed and is not necessarily fatal or attractive” already indicates the risk of euro-zone fragmentation. This explicit rhetoric about a possible Greek withdrawal has investors fearful.

The PBoC lowered their RRR by-50bps to +20% over the weekend. This will allow authorities to release approximately +CNY500b of liquidity into the banking system and “help smooth liquidity imbalances.” Analysts are not ruling out any further cuts this year as China shift to supporting growth rather than boosting it. Guilty by association has the antipodean currencies currently struggling outright as weaker than expected Chinese data of late has added to this market unease.

The market will be watching any development at today’s Eurogroup meeting of euro-zone finance ministers. Public comments on Greece seem unlikely until they have formed a new government. However, France and Spain are expected to be on the agenda, as well as a broader economic outlook for the euro-zone. Analysts believe that any discussion of Spanish budget objectives will have the “risk markets reacting somewhat favorably to any indications of additional forbearance on budget targets.”  Spain is very much under the microscope. No one can pretend to know whether Spain is illiquid or insolvent without gauging the size of the “black hole” that is the country’s banking sector.

Euro data out this week will confirm the regions recessionary conditions of Q1. Growth is expected to contract significantly in Italy, Greece, and Portugal, and even Germany is likely to print small negative numbers. All of this should meet the markets criteria for a ‘technical recession.’ This will only reinforce investors expectations for ECB easing measures, which obviously will not be a EUR supporter. From a technical perspective, the 10 and 30-day moving averages are negatively aligned, reinforcing the overall bearishness of the market. Expect some analysts to shift three month EUR expectations further to the left. For the intraday investor will look to reestablish short EUR positions higher up and is eying 1.28 as the first support buying opportunity.

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May 11, 2012

Week in FX Europe May 6-11

Filed under: OANDA News — Tags: , , , , , , , , , , , , , — admin @ 10:42 am

Following the Greek and French elections last weekend, the mighty buck has found itself in firmer territory against the single unit and the crosses. Investors happen to appear more bullish on JPY and GBP and most bearish on the antipodean currencies. The overall market bearish view looks like supporting the traditional low-yielding safe heaven currencies. This is certainly being backed by the negative April surprises on Euro area growth data. The bears conundrum is why has the single unit held up so well in Q1 and so far in Q2? In truth, despite the sizable LTRO program, looking at the spread differentials they have not moved that significantly against the EUR. The market will obviously expect an easing bias from the ECB to address the weaking of the Euro macro economy to eventually provide that needed pressure to weigh on the currency.

Below are some other highlights of the week:


EUROPE

  • EU: Last weekend’s political news in Europe saw the market initiate a general weakening in risk-sensitive currencies.
  • EU: Sunday’s parliamentary elections in Greece have resulted in a fractured parliament with a strong anti-bailout element. The two main parties, PASOK and New Democracy, which have supported the bailout, obtained only one-third of the votes cast, and no single party gathered more than 20%.
  • EU: The results in Greece have clearly raised the level of uncertainty in Europe’s periphery.
  • FRF: Hollande, a socialist and anti-austerity believer, is France’s new President, beating Sarkozy in a run off.
  • GER: German factory orders rose +2.2% vs. a +0.5% consensus. Digging deeper, domestic orders recovered by +1.3%, m/m, in March after a +0.8% fall in February. Meanwhile, foreign orders posted a strong +3.0%, rise driven by non-euro orders, up +4.8%. However, orders from the euro-zone remained flat after a +3.3% fall in February.
  • CHF: Swiss inflation rose +0.1%, m/m, and -1.0%, y/y, in April after a +0.6% rise in March, a touch weaker than the consensus forecast for +0.2% jump. Higher prices for clothes and shoes (+3.0%) were the main inflationary contributors. Without any new deflationary shock, the market expects the SNB to keep the 1.20 floor unchanged over the near term.
  • GR: Coalition negotiations are ongoing in Greece. Market remains concerned about Greek aid disbursements. Is there momentum building for a Greek effort to exit the EMU?
  • GER: Germany’s industrial production was much stronger in March, gaining +2.8%, m/m, above consensus for +0.8%. February’s print was also revised higher to -0.3% from -1.3%. Analyst’s note that this would suggest that growth momentum has been somewhat stronger than previously thought.
  • UK: The RICS UK house-price index fell to -19 in April from a downwardly revised-11 in the previous month.
  • ESP: The Spanish government announced that they will require its banks to set aside between +EUR20b and +EUR40b in additional provisions as part as an effort to overhaul the country’s financial woes.
  • EU: Since the Greek election results, FX price action has reflected the general risk-off trend, with the big dollar remaining well supported across the board and euro-sensitive risk proxies such as ZAR, HUF, TRY and PLN one of the worst performers on the week.
  • Gr: The Greek anti-austerity rhetoric appears to be intensifying. This would suggest that the possibility of another general election taking place next month has got stronger, while the prospects of Greece ever exiting the EU just got that bit more likely.
  • PLN: The Polish central bank surprisingly raised their policy rate by +25bps to +4.75% this week. Policy makers delivered on its earlier more hawkish language despite weakening domestic data and worrying developments in the Euro-zone.
  • GBP: British retail sales posted their biggest fall in more than a year last month as BRC sales plummeted -3.3%, y/y, last month, following a +1.3% rise in the previous one. Seasonal weather is partially to blame for the poor showing.
  • EU: The Euro IP numbers were mostly better than expected. In France, manufacturing production rose +1.4%, m/m, better than the -0.2% estimate. In Italy, IP rose +0.5%, a better print than the +0.1% expected. Analysts tend to refer to these releases as “stale” data.
  • Gr: In Greece, the leader of the anti-bailout Syriza party surrendered his mandate, passing the mantle over to the PASOK party. Risks of a new election remain elevated as a coalition party formation seems unlikely.
  • SEK: Swedish industrial production rose only +0.4%, m/m, in March and failed to reverse the -5.1% drop in the previous month. Weaker Euro PMI’s suggest a difficult growth outlook. Coupled with moderating inflation has FI traders increasing the price for further Riksbank easing.
  • NOK: Norway’s inflation surprised much weaker than expected. The headline inflation fell to +0.3%, y/y, from +0.8% and has moved in line with the Norges Bank’s projections. The CBank kept rates on hold this week at +1.5%.
  • GBP: UK IP fell -0.3%, m/m. The weakness was driven by mining and energy sectors. Analysts note that the results are unlikely to cause revisions to Q1 GDP and should have little affect on BoE policy, which was left unchanged this week at +0.5%.
  • PHP: Exports fell -1.2%, y/y, in March, weaker than the consensus forecast for a +10.1% gain.
  • GR: Week is ending on news that leaders of Greek New Democracy and PASOK parties are seeking a coalition arrangement with minority pro-euro left wing party Democratic Left. However, the market is leaning towards a second round of elections being the most likely outcome, with negative implications for the EUR.
  • EU: The EU Commission’s new set of forecasts single out Spain with the largest slippage against deficit targets. Spanish budget deficit is expected to reach +6.4% of GDP this year and +6.3% next.
  • GBP: UK construction output fell -4.8% in Q1 and finally, the UK Nationwide consumer confidence index fell to 44 in April from 53.

Aussie Takes It On the Chin

Filed under: OANDA News — Tags: , , , , , , , , — admin @ 10:39 am

Weaker than expected Chinese data has added to market unease allowing the big dollar to end the week on firmer footing. Guilty by association has the antipodean currencies struggling outright. The Aussies in particular have had a sharp deterioration of survey data last month, including three sectoral PMI readings, job and wanted ad surveys and a NAB Business Conditions print. The RBA’s dovish stance is slowly reducing the currency’s yield spread advantage, adding to the impact of fears of a hard landing in China. The market continues to price in another-50bp cut by Governor Stevens. The fears of a Chinese hard landing has the market building on this negative momentum to trade below Aussie parity outright where weak stop losses again are positioned.

Below are some other highlights of the week:


ASIA

  • INR: The Reserve Bank of India late last established week new measures to ease foreign currency flows. First, the interest rate ceiling on Foreign Currency Non-Resident deposits has been raised from +125bps above LIBOR to +200bps above for maturity periods of 1-3 years and to +300 bps above LIBOR for maturities of 3-5 years. Second, the ceiling rate on export credits denominated in foreign currency has been deregulated by allowing banks to freely determine the interest rates on such credit.
  • AUD: Aussie retail sales rose for the third straight month in March. Sales rose +0.9%, m/m, compared with a revised +0.3% rise in February.
  • AUD: Building approvals rose sharply in March, rising +7.4%, m/m, to mark a rebound from an -8.8% drop in February. The NAB Business Confidence rose to +4 points in April from +3 in March. However, jobs ads fell -3.1% on the month, this after a +0.7% gain in March. The AiG Performance of Construction Index also fell to 34.9 in April from 36.2 in March.
  • TWD: Taiwan’s April exports contracted even further, by -6.4%, y/y. This is proof that growth momentum remains weak.
  • AUD: The Aussie trade deficit widened in March to the biggest in five-years as a +5%, m/m, rise in imports outpaced export growth of +2%. Australia posted a seasonally adjusted trade deficit of +AUD1.6b in March from a +AUD754m deficit in February.
  • AUD: The Australian government presented a budget aiming to deliver a surplus in the 2012-13 financial year in line with expectations. Although the target is only a small surplus at +AUD$1.5b, fiscal tightening suggests scope for further rate cuts from the RBA.
  • AUD: Aussie price action this week has been weighed down somewhat by the Australian PM Gillard’s comments that the budget gives the RBA “maximum room” to move on interest rates.
  • KRW: Korean bank lending to households rose to +KRW453.6t last month from +KRW452.3t in March. High household debt is likely to keep the BoK from cutting policy rates any time soon.
  • AUD: Aussie unemployment rate unexpectedly dropped to a one-year low as payrolls rose for a second consecutive month, The jobless rate fell in April to +4.9%, from +5.2%, m/m. Payrolls advanced by +15.5k after a downwardly revised +37.6k gain in March. Report numbers certainly support a “wait-and-see approach” by the RBA.
  • CNY: China’s export growth was weak, falling to +4.9%, y/y, in April from +8.9% in March. Despite the large trade surplus on the surface appearing to be good news, the +$18.4b (+$5.4b in March) is largely a result of weak import numbers. Investors will see this as a significant slip from Chinese domestic demand “for” the rest of the world.
  • NZD: The Kiwi REINZ Housing Price Index fell -0.3% last month compared with a +1.9% rise in March.
  • JPY: Japan posted a ¥1.589t (USD$19.9b) current account surplus in March, down from ¥1.18t in February. Bank lending has fallen to +0.3%, y/y, in April from +0.8% in March.
  • KRW: The BoK The Bank of Korea kept rates unchanged at +3.25% as widely expected and have reduced its 2012 growth forecast for the country to +3.5% from +3.7%.
  • CNY: China’s April growth numbers disappointed. IP slowed down to +9.3%, y/y, from +11.9%, falling well short of the +12.2% forecast. This marks the first single-digit print in three years.
  • CNY: China’s annual CPI moderated in April despite strong food price rises, falling to +3.4%, y/y, from +3.6% in March. This would suggest that domestic demand remains soft, and backs up the weak export numbers this week. Not good news for Antiopodean currencies.

May 9, 2012

New Greek poll looms

Filed under: OANDA News — Tags: , , , , , , , , , , , , — admin @ 10:02 am

Greece moved closer to a second snap election on Wednesday when the head of the biggest party launched a new attack on radical leftist Alexis Tsipras, saying his plans for a new government would push the country out of the euro zone.

New Democracy leader Antonis Samaras said in a televised statement that he hoped Tsipras would “come to his senses” before they met for coalition talks later on Wednesday.

Tsipras, riding a wave of public disgust with economic hardship in last Sunday’s election, has demanded that Samaras and socialist PASOK leader Evangelos Venizelos tear up their 130-billion euro bailout deal with the EU and IMF.

Samaras said this would be “a certain and immediate disaster”.

Tsipras, whose Left Coalition SYRIZA came second in the election, received a three-day mandate on Tuesday after Samaras gave up after only a few hours.

He was due to meet both Venizelos and Samaras later on Wednesday but there seems virtually no chance of agreement on a workable coalition to end Greece’s post-election limbo.

Reuters

Greek Exit Fears Are Growing

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The weekend’s inconclusive elections in Greece were seen by many as an indication of a rising risk that Greece may exit the euro zone.

The New Democracy won the elections with 19 percent of the vote, gaining 108 seats; Syriza was second with 17 percent, winning 52 seats; and Pasok came third with 13 percent, or 41 seats.
The elections results have raised European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010, when the European authorities demanded Greece’s government to implement 11.5 billion euros budget cuts.

Alexis Tsipras of Greece’s Syriza announced that he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to inform the EU leaders about revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Tsipras handed in this ultimatum to renounce support for the EU’s rescue terms as a condition for the political leaders to enter government. Tsipras told reporters that “there will be no 11 billion euros of additional austerity measures; 150,000 jobs will not be cut.” Samaras and Venizelos rejected his request.

Some analysts said, it is possible that Greek political turmoil could result in a new government that actively renounces the bailout—leaving Greece without its rescue aid. If official funding from the International Monetary Fund (IMF) and the rest of Europe were cut off, the Greek government would have no new sources for cash. It could try to stretch out payments to suppliers and government workers and live off its remaining funds for some time. If there would be no spending cuts, the only alternative left to the government would be to print the country’s own currency to pay for government services.

An exit from the currency would throw into doubt contracts denominated in euros, with consequences for the real economy, not just the financial sector. In absence of assurance that a euro payment will actually be made in euros, companies might be less willing to conduct business or trade with vulnerable member states. Investors would start looking at other countries in an environment, where there is already a weakness of natural demand for Spanish and Italian government bonds, particularly among foreign investors.

The bailout has left the governments of Europe, the European Central Bank and the IMF as Greece’s main creditors. While the international creditors urged Greek leaders to hold to the agreed terms of their EU-IMF bailouts, letting Greece exit euro zone would mean significant losses for them. The two-year-old bailout program and the massive debt restructuring earlier this year have helped insulate Europe’s banking system and private sector from Greek troubles.

In the weekend, Tsipras’s party, Syriza, won just 52 of the 300 seats in parliament, and many economists said that the chances it could have to form a governing coalition appeared slim. If Greece is unable to form a government, it faces another election in June and will be on a collision course with its creditors.

Sources: Wall Street Journal and Bloomberg

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