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Posts by "passion trader"
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The CFTC Commitment of Traders is out and, it's a doozy: the amount of short covering in net spec EUR short positions hits what is certainly an all time record, as just under 50 thousand (49,585) short contracts are covered. This represents a huge 44% of all outstanding EUR net shorts (-111,945) as of the prior week. No wonder the EUR surged, and no wonder Goldman downgraded the EURUSD - in tried and true fashion we wonder how many banks tightened up margin requirements only to force the biggest short squeeze in history. It is only logical that every sellside desk would try to sucker as many clients as they could in advance of this rampage. The current net spec short position takes total shorts back to levels from mid-April, when the euro was trading in the 1.30 range. This is very bad news for existing EUR longs as it is now guaranteed that all weak hands have certainly been shaken out. Any additional move higher will actually have to occur for truly fundamental reasons. Alas, those will not be coming any time soon.
BRUSSELS -- The European Union and the euro zone aren't very likely to slip into a double-dip recession, and will instead experience several years of "modest, uneven" growth," European Central Bank Governing Council member Guy Quaden said Wednesday.
Quaden, who was due to step down on August 5 as head of the National Bank of Belgium, said he will stay at least until the formation of a new government, following Sunday's inconclusive Belgian elections. Talks, taking place mainly between Flemish nationalist and French-speaking socialists, could take weeks and go well past August 5.
"I will continue to be in this position until a government is formed," Quaden said.
He called on the political parties to quickly form a governing coalition and said there shouldn't be major elections for another four years to allow the government to make longer-term plans.
"It would not be positive if it were to take too much time," Quaden said.
Quaden said the ECB is determined to withdraw liquidity from the market caused by its purchases of euro-zone government debt, mainly due to German fears about inflation.
"It is a fear I think of some people in Europe and more particularly in Germany," he said.
"The fear is that inflation one day will rise again," he added.
Dow Jones Newswires
From Market Talk
0916 GMT [Dow Jones] Bunds are stable after the 10-year auction went through smoothly. Germany sold EUR5B of the 10-year bund at an average yield of 2.67%, roughly in line with market levels and down from 2.75% at the last auction. The bid-to-cover ratio also inched up to 1.6 times vs 1.4 times previously. September bund contract is up 0.02 at 128.32, and the 10-year bund is up at 102.93 to yield 2.663%.
By Katie Martin
Of DOW JONES NEWSWIRES
LONDON -- The uneasy rally in the euro and other risk-sensitive currencies faltered in European hours Wednesday, as euro-area bond markets showed new signs of stress and concerns built over fiscal strains in Spain.
As the head of the International Monetary Fund prepares to meet the Spanish prime minister Friday, nerves are frayed. The gap in yields between 10-year Spanish and German government bonds hit the widest level since the single currency was introduced, at 2.235 percentage points, as investors headed for safety.
Spanish officials deny the IMF visit is connected to persistent speculation that the country may seek financial assistance soon. Resulting nerves in the financial markets, which are so far modest, may therefore prove to be a blip.
The dollar, which is viewed as a safe haven in troubled times, climbed against the euro and sterling in early European trading hours Wednesday, and nervous market participants suspect that the buoyant sentiment in global markets over recent days may be about to evaporate.
"Yesterday, equities and the euro rallied despite the volatile environment in the bond markets. Now that seems to be fading, and the only real surprise is how far the euro climbed," said Ian Stannard, a currencies analyst at French bank BNP Paribas in London.
"The euro is once again a clear sell," he added.
http://www.businessweek.com/news/2010-06-15/euro-declines-after-moody-s-cuts-greece-s-debt-rating-to-junk.html
It tanked down to 110.85 after the news released, and now reverse back to 112.00.
Any comment?
LONDON -- Only the very brave will keep on buying the euro.
Sure, if the single currency has another stab at breaking over technical resistance at $1.2150, it could find some momentum to rally a little further.
However, there remains little fundamental reason why last week's steady rise in the euro, that brought it up from under $1.1900, will continue.
Both of the factors that appear to have triggered the move--strong economic data from China and an absence of further bad debt news from the euro zone--are hardly likely to last.
Let's take China first.
Reports of soaring exports and retail sales were music to the market's ears. The major engine of the world's economic recovery was proving even stronger than the market expected and helping to offset concerns about growth elsewhere.
Equity markets around the world found a new lease of life. Investors once again became risk-lovers and the euro, which had been diving since the start of the year, started to look cheap.
In the euro zone, meanwhile, the steady flow of bad news on sovereign debtors came to a halt.
In fact, a series of bond auctions across the region were largely successful, helping to convince financial markets that buyers aren't on strike, and that even the large debtors are still able to raise funds in the open market.
By the time German courts had thrown out an attempt to block Germany's participation in the euro-zone rescue package towards the end of the week, there were plenty of reasons why short-covering the euro looked like a good idea.
All the same, this bullishness will doubtlessly unravel.
Chinese growth may be strong but so is Chinese inflation and Beijing will once again be under pressure to start tightening monetary policy to prevent overheating.
The staggering 50% growth in exports that the country achieved in the year to May has already caused consternation in the U.S., with Congressional leaders warning that if China doesn't let the yuan rise soon, they will start restricting Chinese imports.
A world of trade-war threats and speculation over yuan appreciation is hardly one in which the euro will do well.
In the euro zone, meanwhile, there are is barely any assurance that last week's good fortunes will continue.
On the contrary, although euro-zone debtors might have been able to raise more funds, they have done so at a higher cost, suggesting that investors remain highly wary of lending to the region.
Sovereign debt will remain a concern and the euro remains exposed to the next reversal in sentiment.
The European Central Bank certainly hasn't helped.
After the bank's policy meeting last week, ECB President Jean-Claude Trichet missed an opportunity to clarify the bank's recent policy of buying bonds, a move that has proved contentious within the ECB itself and which has made the bank's future policy intentions even more unclear.
As the currency strategy team at Commerzbank AG said, this lack of transparency about its strategy undermines the ECB's credibility.
"As a result, the euro is suffering and there are already enough problems within the euro zone," the team said.
Early Monday the euro is struggling to get a foothold above $1.22 after finding some good buying interest during the Asia session on the back of a positive session for equities.
Around 0645GMT the euro trades at $1.2188, up from $1.2077 in late U.S. trade Friday. The pound fetches $1.4648 up from $1.4516 and the dollar is worth Y91.88, up from Y91.62.
0123 GMT [Dow Jones] EUR/JPY drops on selling by Japan exporters, with falls weighing also on EUR/USD, says senior FX dealer at major European bank in Tokyo. Says any further falls in equities, Nikkei last down 0.3%, may prompt short-term investors to get on board selling of risk-sensitive EUR. Adds "the Moody's downgrade of Greece, while not a major selling factor, certainly isn't helping sentiment toward the euro either." Says many players in Asia anxious about how European share markets will react, in first full day of trade later in global day after Moody's move. Says EUR/JPY may trade with negative bias in 111.20-112.20; cross last 111.71, down from earlier high 112.13. Tips EUR/USD in 1.2170-1.2250 band vs 1.2207.