EUR/USD
After finding support below 1.33, the Euro pushed sharply higher ahead of the US open with a push to a peak around 1.3440. There was some relief that there was solid buying support at the latest Italian auction even though there was a further surge in yields. There was also a strong suspicion that the move was driven more by a short covering of positions given the speculative positioning.
The Euro failed to sustain the gains and retreated back to the 1.33 area during the New York session. In its latest money-market operations, the ECB failed to attract sufficient bids and the latest SMP bond purchases were, therefore, not fully covered. The move increased speculation that the ECB would effectively have to move to quantitative easing, especially as there was further pressure for the bank to increase its Euro-bond purchases to help underpin the Euro. The speculation over quantitative easing triggered renewed selling pressure on the Euro and there were also further expectations of a cut in ECB interest rates.
Euro-zone Ministers agreed that the first 25-30% of new bond issues would be insured as part of their efforts to leverage the fund, although there was a widespread recognition that the EUR1trn target would be out of reach. There were also suggestion of talks with the IMF which could lead to additional funding for peripheral economies. The potentially positive impact was offset by fresh fears surrounding the risks of a French credit-rating cut. There was also a further tightening of money-market conditions and Libor rates continued to edge higher. In this context, the bond auctions will continue to be watched very closely.
The US data was again stronger than expected with consumer confidence registering a significant increase to 56 for November from 40.9 the previous month while there was also a rise in house prices according to the latest data which maintained a slightly more optimistic tone surrounding the US outlook with the Euro consolidating near 1.33 on Wednesday.
Source: VantagePoint Intermarket Analysis Software
Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here
Yen
The dollar was unable to hold above the 78 level against the yen on Tuesday and dipped to lows near 77.60 ahead of the US open with buyers unable to sustain the recent momentum. The yen maintained a slightly weaker tone on the crosses as risk aversion continued to ease with the Australian dollar in particular securing strong gains.
The latest Japanese data was stronger than expected with a 2.4% monthly increase for October, but the PMI manufacturing index dipped back to below the 50 level. The dollar secured some support from better than expected data and pushed back to the 78 area.
Sterling
Sterling pushed sharply higher against the dollar on Tuesday with a break above resistance in the 1.5550 area triggering a further advance to a peak close to 1.5650. There were strong gains for the UK currency against the Euro with a move to the 0.8520 area.
In its Autumn Budget Statement, the government was forced to admit that the economic outlook was significantly worse than expected. The OBR stated that GDP growth was likely to be 0.9% this year following by 0.7% next year and this will inevitably put upward pressure on the budget deficit with borrowing set to be at least GBP100bn higher than expected over the next five years.
The immediate market impact was measured as the adjustments were broadly in with expectations. There was, however, a statement from ratings agency Fitch that the revised UK projections involved a significant deterioration and there was a clear warning that the credit rating could come under pressure. A downgrading would pose very substantial risks to UK confidence and Sterling. The UK currency held firm and only dipped to lows just below 1.5580 against the US currency.
Swiss franc
The dollar found support on dips to below 0.9150 against the franc on Tuesday and recovered strongly to a peak near 0.9240 during the US session. The Euro was capped below the 1.23 level against the Swiss currency.
The latest UBS consumption index secured a slightly stronger reading of 0.91 for October from a revised 0.82 the previous month which will improve confidence slightly, although there will still be major fears surrounding the outlook. The KOF business confidence index will be watched closely on Wednesday for further evidence on business conditions.
Source: VantagePoint Intermarket Analysis Software
Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here
Australian dollar
The Australian dollar found support in the 0.99 area against the US dollar on Tuesday and pushed sharply higher with a peak near 1.0080 before a correction weaker. The currency was also unable to hold above 1.0050 during the Asian session with a retreat back to below parity.
The domestic economic data was stronger than expected with a sharp rise in capital expenditure for the second quarter while there was also a rise in home sales and private-sector credit. There was still a high degree of caution over the global economic outlook, especially with a further decline in Asian equity markets.
