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"Deutsche Bank: pound drops on MPC minutes"(2011-06-22)

 

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British pound fell to the 2-week minimum versus the greenback in the 1.6110 area.

 

According to the Bank of England’s Monetary Policy Committee June meeting released today, the policymakers voted 7-2 to keep the benchmark interest rate at the record minimum of 0.5%. In May the division of opinions was 6-3.

 

Strategists at Deutsche Bank regard the minutes as dovish. The central bank seems determined to keep the borrowing costs low in order to help the national economy recover. As a result, the specialists expect sterling to stay under negative pressure versus its US counterpart.

 

Support levels for the pair GBP/USD are found at 1.6109 and 1.6078. Resistance levels for pound lies at 1.6264, 1.6333 and 1.6383.

 

The new member of MPC Ben Broadbent, who has replaced hawkish Andrew Sentance, voted with the majority to leave interest rates on hold. As a result, only Spencer Dale and Martin Weale are left voting for a hike and even they agreed that the recent economic data as very weak.

 

Strategists at Daiwa Capital Markets don’t expect MPC to raise rates this year. Economists at Investec and Societe General pointed out that some of the MPC officials are talking about the possible need for more asset purchases.

 

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Chart. H4 GBP/USD

 

 

 

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"BBH, Commerzbank: comments on EUR/CHF"(2011-06-22)

 

 

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Strategists at Brown Brothers Harriman, the oldest and largest private bank in the United States, believe that recent demand for Swiss franc was due to the fears that Greek crisis may have global consequences. According to them, now when the Greek government has won the confidence vote, the situation improved and euro will form a base and start rebounding.

 

Technical analysts at Commerzbank, however, are pessimistic about euro’s prospects versus franc. In their view, resistance for EUR/CHF is found at 1.2169 and 1.2177. As long as the pair trades below the latter, the outlook for euro remains negative. If the European currency declines, it will be supported by the record minimum at 1.1950. If euro breaks below this level, it will be poised down to 1.1790 and 1.1600.

 

 

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Chart. H4 EUR/CHF

 

 

 

 

 

 

 

 

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"Commerzbank: German companies survey on EUR/USD and USD/CHF"(2011-06-22)

 

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According to Commerzbank’s monthly survey, German companies are bullish on the single currency in the short term. The firms are paying more attention on the factors negative for US dollar rather than on the Greek debt crisis. However, in the medium term German businesses expect euro to weaken.

 

It’s also necessary to note that the corporations of the most powerful euro zone’s economy don’t think that the advance of Swiss franc is sustainable – more than a half of respondents believe that the pair EUR/CHF will gain in 6-12 months. As for the near term outlook for euro/franc the opinions of the surveyed equally divided.

 

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Chart. Daily EUR/USD

 

 

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"UBS: bearish view on USD/JPY"(2011-06-22)

 

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The greenback keeps trading in a very narrow range of 35 pips versus Japanese yen since the beginning of the week.

 

Technical analysts at UBS are bearish on the pair USD/JPY. In their view, if US dollar breaches 80.00, it will be poised down to May 5 minimum of 79.57.

 

According to the bank, if the pair goes up it will face resistance at June 13 maximum of 80.68.

 

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Chart. H4 USD/JPY

 

 

 

 

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"Commerzbank: signs of USD/JPY recovery"(2011-06-23)

 

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The greenback jumped from the 80.00 area yesterday versus Japanese yen breaking the upper border of the weekly trading range at 80.35.

 

Technical analysts at Commerzbank claim that USD/JPY is showing initial signs of recovery. In their view, the outlook for US dollar is neutral/positive and the pair’s upward move may reach the 81.84/82.31 zone (55- and 200-day MAs) and probably the downtrend from 2007 to 2011 at 83.52.

 

According to the bank, support levels are found at 80.05 and 79.79/57 (61.8% Fibonacci retracement of the advance from March to April and May minimum).

 

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Chart. H4 EUR/USD

 

 

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"Nomura: forecast for EUR/CHF"(2011-06-23)

 

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Analysts at Nomura believe that Swiss currency is going to depreciate only in 2012.

 

In their view, during the next 3-6 months franc will remain strong encouraged by the high demand for it as a safe haven and rather good shape of Switzerland’s economy. The specialists forecast EUR/CHF to trade at 1.22 by the end of this year.

 

Then, in the longer term, franc will get constrained by expensive valuation and rate differentials, claims the bank. According to Nomura, the pair will recover to 1.42 by the end of 2012.

 

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Chart. Daily EUR/CHF

 

 

 

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"The Fed leaves door for QE3 open"(2011-06-23)

 

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The Federal Reserve completes this month its $600-billion QE2 program. However, the Fed’s Chairman Ben Bernanke left open door for new round of monetary stimulus in case American economy doesn’t rebound.

 

According to Bernanke, US will soon get rid of constraints from elevated energy prices and disruptions to manufacturing caused by Japanese earthquake. However, the nation is still facing such severe issues as declining home prices, high unemployment and weaknesses in the financial system that pose risks for its recovery in the longer term.

 

The Fed’s head also said that the prospects of American economy depend on what will happen to Greece as the country’s default will affect global financial markets.

 

The Fed left yesterday its benchmark interest rate in range of 0-0.25% where it’s been since December 2008. Bernanke pointed out that borrowing costs will remain low for an extended period that means at least for another 2-3 FOMC meetings.

 

US economic growth slowed down from 3.1% in the final quarter of 2010 to 1.8% in the first 3 months of this year. The unemployment rate rose to 9.1%.

 

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Chart. Daily EUR/USD

 

 

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"RBS: euro will fall to $1.30 by the beginning of 2012"(2011-06-23)

 

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Currency strategists at Nomura International claim that the underlying debt issue in peripheral euro zone’s nations will keep justifying high risk premium on euro. The situation in the region keeps being very tense and uncertain.

 

Financial Times reports that Antonis Samaras, leader of the opposition in the Greek parliament, said that party will vote against the government’s new austerity measures on June 28. On July 3 European finance ministers will decide whether Greece has met conditions for its next aid payment. In addition, European Central Bank President Jean-Claude Trichet warned that euro zone’s financial stability is danger as the debt crisis threatens to infect banks.

 

Analysts at Royal Bank of Scotland advise investors to sell the single currency at $1.4420 as they believe that the pair EUR/USD will drop by 9.8% hitting $1.30 at the beginning of 2012. Among the reasons for such forecast the specialists cited the future slowdown of European inflation and stumbling Spanish economy on the back of US economic rebound.

 

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Chart. Daily EUR/USD

 

 

 

 

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"BBH: outlook for EUR/USD and GBP/USD"(2011-06-23)

 

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EUR/USD

 

Technical analysts at Brown Brothers Harriman, the biggest and oldest private bank in the United States, say that the single currency has fallen sharply today and got below $1.4200.

 

According to the specialists, the pair EUR/USD may find support at $1.4160. However, the bank warns that euro may be poised down to $1.4080 and hit this level before the weekend unless there is some positive news for the pair.

 

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Chart. H4 EUR/USD

 

GBP/USD

 

The strategists also think that British pound will keep depreciating versus its American counterpart as it has already dropped below the 200-day MA for the first time since the beginning of the year. In their view, the pair GBP/USD is moving down to $1.59.

 

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Chart. Daily GBP/USD

 

 

 

 

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"Bank of Canada: comments on Greece and Canadian economy"(2011-06-23)

 

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Though Bank of Canada’s chief Mark Carney called yesterday the situation in Greece “manageable” in the context of the European Union, he warned that in case the euro zone’s debt crisis escalates, Canada will be exposed trough indirect links with banks in other countries.

 

So, Carney joined Finance Minister Jim Flaherty who had earlier proposed to create a “firewall” around Greece to ensure the nation won’t contaminate the global financial system.

 

Carney projects Canadian economic growth to slow and inflation to remain above 3% (BoC target is at 2%) in the short term. Later this year the nation’s economic should gain pace, says the central banker. It’s also necessary to note that Carney underlines that Canada’s central bank retains the flexibility to hike interest rates if necessary.

 

 

 

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"Deutsche Bank: franc remains competitive"(2011-06-24)

 

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Analysts at Deutsche Bank claim that Swiss franc that gained the most among the major currencies (17% up, according to Bloomberg Correlation-Weighted Indexes) during the past year remains competitive.

 

Investors’ demand for franc is high as it’s regarded as safe haven because of Switzerland’s role as neutral financial center and exporter of precision products.

 

The specialists note that though Swiss currency may reach levels that would harm the nation’s pharmaceuticals and watches, Switzerland’s trade balance and exports are all the same in rather good shape. As a result, franc, in their view, isn’t actually as overvalued as it’s widely thought.

 

Switzerland’s trade surplus rose from 1.44 billion francs in April to 3.31 billion francs ($3.95 billion) in May. Exports fell only by 1.5%, while imports slumped by 8.4%. Exports account for 50% of Swiss economy. During the past year CHF gained 32% versus the greenback and 14% against euro.

 

 

 

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"If Greece decided to leave the euro area"(2011-06-24)

 

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When the European common currency was designed, it wasn’t thought that any member would ever want to leave, so euro architects prepared no exit route. As the euro zone’s debt crisis escalates, the option of Greece leaving the currency block doesn’t sound absurd anymore.

 

Analysts at the think tank Open Europe claim that though European policymakers aren’t working on the plan that would regulate the process of abandoning the monetary union it’s vital to develop such. In their view, one of the only ways to exit would be through a disorderly default on the debt where the country couldn't make a payment. The specialists underline that the banking sector would have to be nationalized as the banks would go under if Greece were to leave to the euro area.

 

Economists at Capital Economists say that one key advantage of withdrawing from the single currency would be to allow a new currency to devalue and give the country a competitive advantage. However, it would then be essential to restructure all debts denominated in foreign currencies or those borrowers – individuals and businesses – would face a huge explosion in the scale of their debt.

 

The analysts claim that the economic and financial system, of course, will suffer much going through a lot of disruption. If Greece leaves the currency block, there will be a run on domestic banks. Such move may be stopped by freezing of the deposits or using capital controls to stop monetary flowing out of the country. It’s also necessary to note that there’s the risk of a black market in euro and dollars while the new currency was created.

 

So, it’s possible to conclude that any plan to make Greece able to quit the euro area has to include nationalization of Greek banks, establishing new restrictions to stop monetary and capital outflows and restructuring of the nation’s huge debt.

 

 

 

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"BofNY Mellon, Ueda Harlow: AUD/USD prospects"(2011-06-24)

 

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Currency strategists at Bank of New York Mellon are bearish on Australian dollar. The specialists think that investors’ demand for Aussie may soon start declining. In their view, AUD will be affected not only by the global growth concerns, but also by the monetary policy of China, its largest trading partner, that’s trying to ease down the surging prices. In addition, according to the bank, the factors that contributed to the Aussie's advance this year above parity versus its US counterpart may become the biggest risk factors over the rest of 2011.

 

Economists at ICAP Australia, however, don’t share such pessimistic view. The pair AUD/USD rose today from 1-month minimum helped by the hopes that next week Greece will pass austerity measures needed to receive financial aid. ICAP says that investors wait that some of the uncertainties will clear up. In their view, the global economy isn’t looking too bad. If the Greek vote on budget cuts looks like it’s going to be passed or has been passed, the analysts advise to buy Aussie and kiwi.

 

At the same time, strategists at Ueda Harlow warn that one still can’t be certain of how things will go in Greece next week. The specialists think that the Reserve bank of Australia has already raised interest rates a lot and there may not be room left for a lot more hikes. As a result, Ueda Harlow expects AUD/USD to be unstable and biased to the downside.

 

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Chart. H4 AUD/USD

 

 

 

 

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"UBS, Commerzbank: outlook for EUR/USD"(2011-06-24)

 

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Analysts at UBS note that though Greece's new austerity plan encouraged risk appetite allowing euro to bounce versus the greenback on short term, the pair EUR/USD is under bearish pressure after it breached yesterday the 1.4128 level. According to the specialists, euro is poised down to 1.4070 and then to 1.3970.

 

Strategists at Commerzbank place downside targets for the European currency at the 200-week MA of 1.4014, the recent minimum at 1.3968 and the 200-day MA at 1.3854. In their view, there’s strong resistance at the 55-day MA and the Ichimoku Cloud top at 1.4369.

 

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Chart. Daily EUR/USD

 

 

 

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"Barclays, Standard Bank: EUR/USD prospects"(2011-06-24)

 

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The pair EUR/USD bounced today for a short period of time as Ifo index of German business confidence unexpectedly increased in June. Then, however, the single currency went down again due to the concerns that EU pledge to stabilize the situation in the region won’t resolve a sovereign-debt crisis.

 

European finance ministers will decide on July 3 whether Greece has met conditions for its next aid payment.

Yesterday EU leaders urged the nation to pass next week the 78 billion-euro ($111 billion) package of budget cuts and vowed to do what’s needed to meet the country’s financing needs. Greece needs to cover 6.6 billion euro of maturing bonds in August, so if the nation doesn’t get the fifth tranche of bailout, it will default.

 

Analysts at Barclays Bank are optimistic believing that Greek parliament will approve the fiscal austerity measures.

 

Strategists at Standard Bank advise to sell euro versus Swiss franc. Analysts at Morgan Stanley recommend shorts on euro versus US dollar expecting EUR/USD to slide to $1.36. Economists at CMC Markets say that the solution of Greek problems would take months and years.

 

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Chart. H4 EUR/USD

 

 

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"Ichimoku. Weekly forecast. GBP/USD"(2011-06-27)

 

 

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Weekly GBP/USD

 

Last week turned out to be very negative for the British currency – the pair GBP/USD lost almost 200 pips breaching the Standard line (2) which remains horizontal.

 

The short-term trend has turned bearish – the Turning line (1) reversed down. It’s also necessary to note that the bullish Ichimoku Cloud is narrowing (3).

 

As a result, the prices are likely to keep moving down to test the upper border of Kumo.

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Chart. Weekly GBP/USD

 

Daily GBP/USD

 

While at the beginning of the last week the bulls were still able to push pound higher, though with fight, on Wednesday sterling sank on the concerns about the weakness of British economy and the prospects of Bank of England’s loose monetary policy.

 

The lines Tenkan-sen (1) and Kijun-sen (2) keep holding in place the “dead cross” that has been formed below the Ichimoku Cloud – the bearish sign.

 

The lagging Chinkou Span didn’t manage to overcome resistance created by the price chart. The short-term trend is descending as the Turning line and the Standard lines lined up with the former below the latter and Senkou Spans “B” and “A” mirroring their move.

 

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Chart. Daily GBP/USD

 

 

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"Ichimoku. Weekly forecast. USD/CHF"(2011-06-27)

 

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Weekly USD/CHF

 

On the weekly chart there’s some consolidation – during the past month the pair USD/CHF was staying 0.8320 and 0.8550.

 

In addition, the Standard line which indicates the longer term trend became horizontal (2), though the short-term Turning line (1) keeps declining.

 

The lines that limit the Ichimoku Cloud – Senkou Spans “B” and “A” are also going down.

 

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Chart. Weekly USD/CHF

 

Daily USD/CHF

 

On the daily chart the prices went down below the Turning line (1) that is now once again acting as a resistance.

 

The lines Tenkan-sen (1) and Kijun-sen (2) are still holding stronger “dead cross” (5), though now they are both directed horizontally. In addition, it’s possible to note that the Ichimoku Cloud has narrowed a bit (3) and that there was a “hammer” candle formed on Friday. As a result, one may look forward to see some recovery of dollar’s rate this week.

 

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Chart. Daily USD/CHF

 

 

 

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"Commerzbank: comments on EUR/USD"(2011-06-27)

 

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Technical analysts at Commerzbank claim that the single currency is consolidating versus the greenback above support at 1.4113.

 

Then, in their view, the pair EUR/USD will go down towards 1.4017 (200-week MA), 1.3968 (recent minimum) and 1.3860 (200-day MA). If euro closes below this zone of support, it will drop to 1.3570/1.3620.

 

According to the bank, resistance levels are found at 1.4365, 1.4500/69 (6-week downtrend) and 1.4732 (78.6% Fibonacci retracement).

 

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Chart. Daily EUR/USD

 

 

 

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"Soros: mechanism to quit euro zone needed"(2011-06-27)

 

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Famous billionaire investor George Soros claims that the euro area will have no choice but to develop a mechanism that would allow weaker economies to exit the monetary union as these countries will inevitably need to abandon euro.

 

According to Soros, the risk that Greek crisis will spread and contaminate other European nations is high. The specialist underlined that the financial system remains extremely vulnerable. Soros says that the crisis in Europe is still developing. In his view, the region’s authorities are trying to buy time, while time is working against them.

 

We have already heard Soros speaking in January in Davos that the currency union would dissolve. The well-known market player believes that the European leaders have to adjust their policies both for core and peripheral member states to promote their economic recovery. In his opinion, they have to look for alternative strategies to solve the debt crisis such as taxes for the whole EU.

 

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Chart. Daily EUR/USD

 

 

 

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"Barclays Capital recommends buying USD/CHF"(2011-06-27)

 

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The markets currently find themselves in the situation of high uncertainty: there’s the euro zone’s debt crisis, US economic weakness and potential surprises from the North Africa and the Middle East. So, it’s time to turn to safe havens.

 

Analysts at Barclays Capital advise investors to buy US dollar versus Swiss franc.

 

The specialists have determined 4 possible scenarios and tried to analyze how various currencies might perform if each of them realizes. The scenarios are: continued slow growth in the United States, increased problems in the euro area on the back of diminishing fears about the global growth, escalating tensions at the Middle East and, finally, the worst case scenario that combines the negative factors of the others.

 

Strategists at BarCap have come to the conclusion that in all but one – the mild increase in euro zone periphery problems – the greenback will outperform Swiss currency. The bank believes that if European crisis escalates it won’t be contained within the region, but will affect global financial market. In such case US dollar and Japanese yen may outperform other major currencies as liquidity risk premia go up and currencies move back towards fair value.

 

In addition, it’s necessary to note that the greenback is currently trading at very low levels under 0.8400 versus Swiss franc and many specialists think that the trend may reverse upwards.

 

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Chart. Daily USD/CHF

 

 

 

 

 

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"MIG bank: technical analysts on USD/JPY"(2011-06-27)

 

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Technical analysts at MIG bank note that the greenback managed to break above the psychological 80.00 zone breaking out the large triangle. The specialists are bullish on USD/JPY in the medium and longer term.

 

If US currency manages to close above the post G7 intervention maximum at 82.00 and hold there, it will be able to advance to the post March 11 earthquake shock maximum at 83.30 and then to 85.50 (April 7 maximum). If the bulls push the pair above the latter, USD/JPY will rise to 88.70.

 

The specialists note that support levels are situated at 80.00 (potentially key level for the Bank of Japan) and 79.80 (61.8% Fibonacci retracement). Only if the pair closes below the latter, it will be poised down to 78.80.

 

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Chart. Daily USD/JPY

 

 

 

 

 

 

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"Commerzbank, BNP Paribas: bullish view on EUR/USD"(2011-06-27)

 

 

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Economists surveyed by Bloomberg News believe that the European Central Bank will raise its benchmark interest rate to 2% by the end of the year, while the Federal Reserve will stay on hold until the first quarter of 2012.

 

Analysts at Commerzbank believe that the ECB doesn’t seem to be affected by the Greek crisis. The fact that Jean-Claude Trichet signaled the rate hike in order to curb inflation when some of the region’s economies have to conduct severe austerity measures means that the euro area’s central bank’s policy is independent of what’s happening in the indebted nations. According to the specialists, the pair EUR/USD may firstly rise to $1.50 and then ease down to $1.45 by the end of 2011.

 

Today is the first day of the 3-day debate in Greece on new budget cuts. The law will be discusses and voted on June 30. Strategists at BNP Paribas believe that the situation in Greece will be resolved in a way positive for the single currency. In their view, the fact that Germany has made a concession and stopped insisting on the forced debt restructuring is very good signal. The bank expects the single currency to advance to $1.55 by the year-end.

 

Economists at JPMorgan Chase claim that the European policymakers seem to be very eager to save the monetary union. If the euro zone’s authorities manage to take the debt crisis more or less under control and there are the signs that the global recovery is gaining momentum, euro will get some support.

 

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Chart. Daily EUR/USD

 

 

 

 

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"Commerzbank: comments on EUR/GBP"(2011-06-28)

 

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The single currency rose versus British pound overcoming resistance at 0.8939.

 

Technical analysts at Commerzbank believe that the pair EUR/GBP will reach the top of the 2-year channel at 0.8980, but won’t be able to move above this level.

 

In their view, euro will drop back to the 0.8820/0.8783 area representing 20-day MA and support line.

 

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Chart. Weekly EUR/GBP

 

 

 

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"William Pesek: what euro area may learn from Asia"(2011-06-28)

 

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Bloomberg columnist William Pesek gave an interesting view on the situation in the euro area drawing parallels between the current European debt crisis and what Asia experienced in 1997.

 

In their view, despite all the differences between 2 regions the consequences of the 2 set of events may be much similar. That implies that the euro zone may face serious political problems and deterioration of living standards, while the reputation of the IMF will get tainted.

 

The specialists have pointed out 5 lessons Europe can take from Asia:

 

1. Default is inevitable, so the bailouts seem to be vain. As Greece requires more and more funding, financing the nation will weaken other economies of the monetary union.

In Asia after Thailand devalued the baht in July 1997, Indonesia and Korea were contaminated by the crisis.

 

2. Recovery is quicker when debts are repaid. By now Greek government has lost much credibility. Pesek thinks that Greece has to restructure its debt and if such measures were taken a year ago they would be less painful and didn’t agitate the market that much.

 

In December 1997 Korea received $57 billion IMF bailout. The nation acted quickly to let weak companies fail, closed insolvent banks, fought tax cheats and came managed to reduce its debt quickly enough.

 

3. Europe needs to conduct vast reforms to make the region’s economy more competitive. The policymakers can’t count only at the austerity measures.

 

After the crisis Asian nations put a lot of efforts in advancing the service sectors.

 

4. It’s necessary to try balancing the budget through promoting higher growth rate, but not by increasing taxes.

 

Japan was practicing monetary stimulus for nearly 2 decades hoping to achieve 5% growth. Then its deficit dramatically expanded, the country made a huge mistake lifting up consumption taxes in 1997 that got the last air out of the recovery.

 

5. The conditions of Greek bailout are less strict than those designed for Indonesia, Korea and Thailand 14 years ago.

 

The main conclusion of the specialist is that all is not as bad as one may think. Asia has managed to survive the crisis and so will Europe. It’s necessary to let Greece do what needs to be done even if the country has to default.

 

 

 

 

Comment here http://www.fbs.com/analytics/news_markets/view/7769

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"French banks agreed to the partial rollover of Greece’s debt"(2011-06-28)

 

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Yesterday French banks including BNP Paribas told the French government that they were willing to partly roll over maturing Greek government bonds in order to help the indebted nation avoid default.

 

Under the proposal discussed in recent days between the French Banking Federation and the French Treasury, bondholders are going to re-invest about 70% of Greek sovereign debt maturing from mid-2011 to mid-2014. 50% percent of the redemptions would go into 30-year Greek securities, with the remaining 20% invested in a fund made of “very-high quality” securities that would back the 30-year bonds.

 

Greece’s outstanding debt has almost reached 340 billion euro that includes bonds of 100 billion euro maturing by the end of 2014.

 

Several German banks note that there’s a good purpose in the French banks’ idea claiming, however, that 30 years is too long a period. The bankers are ready to discuss the maturities of 15, 10 or 5 years. There will be more talks on the matter.

 

Analysts at RBC Capital Markets note that that bank-backed rollover would be only a partial solution of Greece’s crisis as commercial banks are holding just 27% of the nation’s sovereign debt. The ECB that had earlier announced that it wouldn’t participate in the rollover holds 14% while the European Union and International Monetary Fund have the remaining 16%.

 

 

 

Comment here http://www.fbs.com/analytics/news_markets/view/7770

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