Equity markets and EURUSD alike were buoyed overnight by the EU summit agreements which outlined a three-pronged solution to the Eurozone debt crisis. The first key element agreed was the recapitalisation of European banks to the tune of around EUR 106bn by June 2012, followed up by the agreement with the IIF that there would be a “voluntary” 50% haircut on holdings of Greek debt. The third part of solution was the deal to increase the Eurozone’s bailout fund to EUR 1trn by leveraging its existing assets. The plan managed to boost Asian equity markets higher overnight, with the Nikkei +2%, Hang Seng +2.3%, and Shanghai Composite +0.4%. EURUSD has also been bid up to highs of 1.4014, but the rather modest pace of the rally suggests that EU leaders have done just enough to soothe sentiment, and perhaps some in the market were hoping for an even more ambitious and wide-reaching solution.
The RBNZ meeting last night resulted in rates being kept on hold at 2.50% as expected, but interestingly the central bank opted to retain an explicit tightening bias. In spite of the prevailing global uncertainty which has already prompted the BoC to drop its tightening bias earlier this week, the RBNZ asserted that if global developments have only a mild impact on the New Zealand economy” then “future OCR increases” may be warranted. In turn NZD has been one of the outperformers during the Asian session, with NZDUSD up over 1.8% since the announcement, now trading around 0.8080 levels.
The BoJ meanwhile left interest rates unchanged at 0.10%, and decided to increase its JGB purchases by an extra 5 trillion yen (previously the size of the asset purchase facility stood at 50 trillion yen). This additional easing had been widely expected going into the meeting, and the size of the program remains modest; therefore this increase to the purchase ceiling is likely to have a very limited effect on the currency going forward.
Coming up in this morning’s session we have German regional and national CPI, along with Eurozone consumer and economic confidence. This afternoon, the headline is undoubtedly going to be the US advance Q3 GDP reading, where consensus estimates are looking for a 2.5% QoQ annualized pace of growth compared to Q2’s subdued 1.3% print. US claims data for the week and the latest pending home sales figures will round out the day.
By
M.Zohaib Gadit
Forex Trading Consultant
The RBNZ meeting last night resulted in rates being kept on hold at 2.50% as expected, but interestingly the central bank opted to retain an explicit tightening bias. In spite of the prevailing global uncertainty which has already prompted the BoC to drop its tightening bias earlier this week, the RBNZ asserted that if global developments have only a mild impact on the New Zealand economy” then “future OCR increases” may be warranted. In turn NZD has been one of the outperformers during the Asian session, with NZDUSD up over 1.8% since the announcement, now trading around 0.8080 levels.
The BoJ meanwhile left interest rates unchanged at 0.10%, and decided to increase its JGB purchases by an extra 5 trillion yen (previously the size of the asset purchase facility stood at 50 trillion yen). This additional easing had been widely expected going into the meeting, and the size of the program remains modest; therefore this increase to the purchase ceiling is likely to have a very limited effect on the currency going forward.
Coming up in this morning’s session we have German regional and national CPI, along with Eurozone consumer and economic confidence. This afternoon, the headline is undoubtedly going to be the US advance Q3 GDP reading, where consensus estimates are looking for a 2.5% QoQ annualized pace of growth compared to Q2’s subdued 1.3% print. US claims data for the week and the latest pending home sales figures will round out the day.
By
M.Zohaib Gadit
Forex Trading Consultant
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