What a difference one day makes. Asian equity markets are in deeply negative territory, as optimism over a impending solution to the European crisis has now fading. The Nikkei is trading -1.56% whilst the Hang Seng is significantly lower at -3.57%. EURUSD which fell steeply yesterday from 1.3915 to 1.3725 recovered slightly but remains heavy. AUDUSD the other big loser yesterday falling to 1.0149 regained some lost ground as RBA minutes removed much of the risk of a near term cut. The run on optimisms began yesterday as a comment from a German spokesman, Siebert, that expectation for a comprehensive solution by the end of the EU summit would be overly optimistic. He then added that the search would continue in 2012. The remark triggered a sharp sell-off in risk and expectations for a new term solution to the European debt crisis came crashing down. To follow up ECB Executive Board member Stark also appeared to calm expectations of a step forward at the upcoming summit, stating that what was being discussed was not the "quantum leap" the ECB had been looking for.
In yesterdays US session, Moody’s expressed concern over the possible erosion of Frances fiscal position in the near term. The rating agency did not downgrade the nation, merely put France on review for a possible downgrade. Moody’s focus will be on Frances efforts to support the EU and banks, which could add significantly liabilities to the French balance sheet. On a side note, should France get downgraded EFSF’s AAA rating likely to come under pressure.
In Australia, RBA minutes echoed the feeling of the October policy statement, restating that the RBA is open to rate cuts if needed to support growth not that midterm inflation pressures are now easing. The spillover effect into AUD was minimal, but rates adjusted quickly increasing the probability of a rate hike in 2011 and the RBA is expected to support demand. In China, GDP was below expectations at 9.1% vs. 9.3% exp, however other data including retail sales, industrial production and fixed asset investment were all strong than anticipated.
Coming up in today’s European session, the economic calendar picks up with UK CPI, EZ ZEW economic sentiment, German expectations. And in the US session we have US PPI and TIC data.
In yesterdays US session, Moody’s expressed concern over the possible erosion of Frances fiscal position in the near term. The rating agency did not downgrade the nation, merely put France on review for a possible downgrade. Moody’s focus will be on Frances efforts to support the EU and banks, which could add significantly liabilities to the French balance sheet. On a side note, should France get downgraded EFSF’s AAA rating likely to come under pressure.
In Australia, RBA minutes echoed the feeling of the October policy statement, restating that the RBA is open to rate cuts if needed to support growth not that midterm inflation pressures are now easing. The spillover effect into AUD was minimal, but rates adjusted quickly increasing the probability of a rate hike in 2011 and the RBA is expected to support demand. In China, GDP was below expectations at 9.1% vs. 9.3% exp, however other data including retail sales, industrial production and fixed asset investment were all strong than anticipated.
Coming up in today’s European session, the economic calendar picks up with UK CPI, EZ ZEW economic sentiment, German expectations. And in the US session we have US PPI and TIC data.
By
M.Zohaib Gadit
Forex Trading Consultant
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