Intraday Market Thoughts

EURUSD Holds Above 1.42, Greek PM Pleads for New Govt, Fitch on Aussie

by Adam Button
Jun 20, 2011 4:49

The latest from Greece is that PM Papandreou has urged parliament to back his new government in Tuesdays vote of confidence, warning that the country "will quickly run out of funds" if it is unable to draw down a E12bn loan tranche expected in July. Euro holds footing above 1.42, in line with Fridays trading outlook from the latest Premium piece. We introduced the euros 1-month volatility chart and how to apply it for EURUSD spot.

The other hard test facing Papandreous Socialists is a second parliamentary vote due on June 28 to approve medium the latest term austerity package in order for the next tranche of the current EU-IMF loan to be disbursed, the FT says.

Markets shrugged Moody's late Friday announcement to review Italy. Moody's placed Italy's Aa2 rating on review for a potential downgrade and US consumer sentiment declined on Friday. The news cut into the earlier optimism about an agreement to bail out Greece.

EUR/USD closed the week above 1.43 after falling into the low 1.41s prior to the Greek agreement. US Stocks hung on to a small gain and closed higher for the week after a six-week losing streak. NZD and EUR were the top performers while USD and CHF lagged. Oil fell to a four-month low and precious metals rallied.

The negative sentiment generated by the Moody's review was not nearly enough to overwhelm the EUR relief rally as the crisis in Greece appears to be subsiding for the moment. Economic data CONTINUES TO POINT TO A SLOWING US ECONOMY. The U Mich consumer sentiment survey fell to 71.8 in June compared to the 74.0 expected. The NYT also reported the Goldman, Merrill and BoA are planning layoffs. The IMF damaged confidence with a report on the rising risks to the global economy.

MNI FX Bullets reports that Fitch Ratings expects the NZs Christchurch earthquake to impact Australia's major non-life insurers but says costs could be manageable due to the protection from its reinsurance program and NZ Earthquake Commission.

Friday's CFTC report showed EUR specs trimming positions (but only by 5%) and JPY longs increasing. The USD is held short against every major currency.

The title of our latest Premium Piece: "Euro Confirms, 1 Month Volatility Look"

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