Mike Paterson’s daily Forex brief
We’ve seen further falls in the Euro and stock markets as EU leaders, unsurprisingly, failed to come up with any real initiative to appease the dire situation now facing the Eurozone and related trading partners.
German Chancellor Merkel stood firm on her aversion to Eurobonds as I predicted yesterday, but is rumoured to have signed off on an FDIC-like deposit insurance scheme for European banks. The FDIC charges banks a premium to insure deposits and the funds are set aside to protect against bank failures. When the premiums run dry, the US government makes up the difference. This appears to be a severe case of horse and stable door, or as one of my colleagues wrote yesterday, it seems like a bad idea to offer fire insurance to someone whose house is in flames.
As for Eurobonds, that too has always been a vastly inflated remedy idea given that it involves lending vast sums of money to countries like Greece and Spain who can't pay it back, something they've been trying out for a while now.
So the Euro has once again come under pressure with EURUSD falling below very strong support at 1.2600 and taking out more long positions as it made rapid headway towards 1.2550. Talk on the interbank and prime brokerage markets yesterday is that we saw a record volume of turn-over on this pair as investors piled out of the Euro and emerging markets and into the Greenback.
EURGBP dipped below 0.8000 for a moment (GBPEUR up through 1.2500) but has since steadied as GBPUSD played catch up and fell to 1.5667, and EURJPY has also seen huge selling again breaching the huge 100 line and touching 99.71 at one point.
Overall the Pound has had a mixed time of it with GBPCHF holding above 1.4950 but GBPAUD topping out yet again above 1.6125 and falling back to 1.6050.This morning at 09.30 BST sees the second reading of Q1 UK GDP and mortgage approval data with ECB President Draghi and US Treasury Sec Geithner speaking this afternoon.
All in all I'd say we've got another ugly day ahead.
Interbank Rates 07:22 BST
Today’s Data: BST
09.30-UK – GDP / Mortgage Approvals / Business Investment / Index of Services
13.30-US- Durable Goods Orders / Weekly Jobless Claims
14.00-EU- ECB President Draghi speaks
20.00-US- Treasury Sec Geithner speaks
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Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email firstname.lastname@example.org
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.