Risk appetite remains under pressure as the optimism around a near term solution to the European crisis now feels distant and credit ratings agency warning highlights linger effects of the European crisis. Moody's cautioned it might cut the credit ratings of 121 financial institutions (114 European), further indication the impact of the euro zone debt crisis is damaging the global financial system. "Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions," the ratings agency said in a statement. Yesterday, the first alarm bell sounded when EU leaders called off Wednesdays planned Eurogroup meeting; a move that was officially attributed to paperwork not being ready, but was unofficially seen as a sign that EU leaders are losing faith in the Greek government’s policy continuity and ability to adhere to terms of a bailout after the next Greek elections. This latter theory was catalyzed by German Finance Minister Schaeuble talking openly about contingency plans in case Greece exited the Eurozone. Then came a series of headlines that PSI would wait until after the April general election before finalizing the details of the debt swap. In response to these developments EURUSD sold off to lows of 1.3080, forcing Greece’s government (PASOK and New Democracy Party) to submit a hastily composed pledge to maintain policy even after the next elections.
During the Asian session, equity markets have had a weak showing with the Nikkei down -0.24%, Hang Seng -0.56% and Shanghai Composite +0.65%. Looks like a big drop in European indices are heading our way with DAX futures down -1.5%. Gold is drifting lower to $1,720.00 levels. Brent firmed around the $119.00 level after yesterday’s reports that Iran was cutting Europe’s oil supply and was loading Tehran’s nuclear reactor with fuel rods. USDJPY continued to drift lower on the back of some troublesome Greek headlines, and upward momentum looks to have stalled. EURUSD continued to attract seller as the pair fell from 1.3070 to 1.3002. EURGBP broke through critical support at 0.8340 and looks to be a sell on rallies. In Australia, employment came in at 46.3k vs. 10k exp. while Unemployment rate dips to 5.1%. AUDUSD rallied from 1.0685 to 1.0739 high post-print as the probability that the RBA would cut in March has now all but disappeared. However, the negative sentiment has trickled inot the AUD and the pair since has drifted lower.
Coming up in today’s session we have a light schedule of economic releases. First up will be the release of the Spanish & Norway GDP. Both numbers should give us some deeper indication of how bad thing are in Europe and spillover into trade partner nations. In the US we have PPI which is expect to rise m/m from -0.1 to a more healthy 0.4%, although y/y reads should come down from 4.8 to 4.2%. Then it’s on to Housing Starts and Jobless claims.
During the Asian session, equity markets have had a weak showing with the Nikkei down -0.24%, Hang Seng -0.56% and Shanghai Composite +0.65%. Looks like a big drop in European indices are heading our way with DAX futures down -1.5%. Gold is drifting lower to $1,720.00 levels. Brent firmed around the $119.00 level after yesterday’s reports that Iran was cutting Europe’s oil supply and was loading Tehran’s nuclear reactor with fuel rods. USDJPY continued to drift lower on the back of some troublesome Greek headlines, and upward momentum looks to have stalled. EURUSD continued to attract seller as the pair fell from 1.3070 to 1.3002. EURGBP broke through critical support at 0.8340 and looks to be a sell on rallies. In Australia, employment came in at 46.3k vs. 10k exp. while Unemployment rate dips to 5.1%. AUDUSD rallied from 1.0685 to 1.0739 high post-print as the probability that the RBA would cut in March has now all but disappeared. However, the negative sentiment has trickled inot the AUD and the pair since has drifted lower.
Coming up in today’s session we have a light schedule of economic releases. First up will be the release of the Spanish & Norway GDP. Both numbers should give us some deeper indication of how bad thing are in Europe and spillover into trade partner nations. In the US we have PPI which is expect to rise m/m from -0.1 to a more healthy 0.4%, although y/y reads should come down from 4.8 to 4.2%. Then it’s on to Housing Starts and Jobless claims.
By
M.Zohaib Gadit
Forex Trading Consultant
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