Mike Paterson’s daily Forex brief
Yes I had a great time at my friend’s wedding yesterday, and yes I’ve got a headache this morning as predicted. Thanks for asking!
So what’s been going on in the wonderful world of foreign exchange? Well the Old Lady kept interest rates and QE on hold as expected, the ECB did likewise, as expected, but ECB President Draghi warned of higher energy price-led inflation and lower growth. The markets had a little shake out but nothing earth shattering.
We’d seen some US $ selling in the morning accelerating as I reported when I signed off. EURUSD moved higher to test resistance at the technical level of 1.3265 before falling back only to rise rapidly to test it again on Draghi’s inflation forecast before falling again on the lower growth expectations! In all this though we only traded 1.3220-1.3280 in real terms but, like I said, it was enough to get traders on the wrong side a few times.
Prior to all this China had been seen clobbering GBPUSD, putting a cap on it at 1.5830 and driving it down to 1.5780, which impacted on the Pound overall. EURGBP rose sharply to 0.8380 (GBPEUR 1.1933) from its seemingly super-glued 0.8350 (1.1976) and elsewhere we saw GBPCHF drop below 1.4400 and GBPAUD fall to 1.4830.
This morning Greece has announced an 85.8% participation by its private sector bondholders to accept the bond swap offer, a.k.a. “haircut”, with expectations that after a second round of opportunity on March 23rd the rate could climb as high as 95.7%. All sounds impressive and there’s been the expected crowing from Greece and other EZ countries about how positive it all is for the bailout deal.
In reality though no-one really knows what impact it might have on the credit markets, but we get a clue when the derivatives body ISDA meet at 13.30 GMT to determine whether a “sovereign credit event” i.e. some form of default , has occurred. In effect Greece has managed to get this group of investors to write off over â‚¬105 billion. The Euro has eased off a little on the back of this uncertainty after the initial positive price-action.
Also a big afternoon for US data with Non Farm Payrolls, Unemployment Rate and Trade Balance all due at 13.30 and bound to have impact. UK data just out showed Industrial Production at – 0.4% for January and – 3.8% year on year, the biggest fall since November 2008 and we’ve seen a little sell-off in the Pound as would be expected.
And that’s it, another week coming to a close but with little progress made on deciding where we’re going next. The usual Friday afternoon fun-‘n-games may yet provide an answer.
Have a great week-end where ever your pleasure takes you.
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