AUDUSD: After a long period of building savings and cutting credit card debts, Australia’s cautious consumers may not be far from loosening their purse strings, Reserve Bank of Australia Governor Glenn Stevens said Tuesday.
The central bank governor also told a luncheon of business economists the recent strength in Australia’s terms of trade may also have peaked.
Consumer spending has been muted in 2011 as rapid structural changes in the economy brought on by surging commodity prices and a high Australian dollar have shaken confidence, Stevens said. A hit to wealth creation stemming from the global financial crisis has also weighed on the mood of consumers.
The cooling in consumer spending has widened the divide in Australia’s two-speed economy. While mining companies’ boom, many retail chains have closed or are reporting much weaker profits. Soft consumer demand has also allowed interest rates to be left on hold since November 2010, the longest period of stability in rates in five years.
We expect a range for today in AUDUSD rate of 1.0900 to 1.1000 (Yesterday, it hits our stop loss. We set to short at 1.100, stop loss at 1.1060, target at 1.0915, 1.0860)
EURUSD: European banks raised their purchase of U.S. state debt during the first quarter of the year by 56% and are now the most exposed foreign banks to U.S. public debt. European-headquartered banks’ holdings of U.S. debt reached $752.6 billion at the end of the first three months of the year, while claims on the U.S. banking and private sector held steady during the period, according to fresh data released by the Basel-based Bank for International Settlements.
BIS data shows that overall public debt held by European banks increased across the board or held steady during the first quarter, except in Greece, where it fell by nearly $12 billion from the previous quarter to $42.9 billion. Europe has been in turmoil since last year due to fears that some of the continent’s economies–notably Greece, Ireland and Portugal, but also Italy and Spain–would be unable to meet their debt obligations.
German banks were the biggest lenders to the Greek state, to which they lent $14.1 billion or 33% of total Greek public debt. Their French counterparts were close behind, lending 31% of Greek state debt. French banks hold 30% of Spanish public debt while German financial institutions hold 27%. French banks meanwhile also have significant exposure to Italian state debt, holding about 45% of the country’s public debt, according to BIS data that only includes figures from 24, mostly large economies.
We expect a range for today in EURUSD rate of 1.4400 to 1.4545 (We currently shorting the pair at the current market, stop loss at 1.4580, target 1.4420 down to 1.4360. We also set to short the pair at 1.4545, stop loss at 1.4620, target 1.4480 down to 1.4420)
USDJPY: The U.S. is currently in intense negotiations to raise the country’s debt ceiling. If it fails to get a deal before Aug. 2, the country could be forced to default on its obligations.
The Congressional Budget Office said Tuesday that a Republican-backed plan to raise the debt ceiling would reduce the federal budget deficit by $850 billion over 10 years compared with the most recent baseline, $350 billion less than Republicans had predicted their plan would save.
The plan would save about $695 billion in discretionary spending, $20 billion in mandatory spending and $135 billion in lower interest on the public debt because of the lower deficits when compared with the March baseline, a projection of the government’s funding under current law.
Republicans had requested a comparison of their plan to the January baseline, which shows greater savings, since it doesn’t reflect spending cuts Congress has passed since then. Relative to that yardstick — which was largely an extension of 2010 funding levels — the plan would save $875 billion in discretionary spending, $20 billion in mandatory spending and $175 billion in savings from interest on the debt.
We expect a range for today in USDJPY rate of 77.80 TO 78.60 (We continue to support the Dollar against the Yen, although short term might not be a good impression. But we continue to hold our trade from last week)
