Mike Paterson’s daily Forex brief
After the panic buying of Euros following the Spanish bank bailout we’ve seen a continuation of yesterday’s reality check that I spoke of as traders scrambled to get short again. Crazy days indeed, but not unexpected.
It was made quite clear by the “Troika” (IMF, ECB, EC) that they will be imposing some conditions on the bailout and monitoring it closely contrary to a statement made by Spanish PM Rajoy. Further complicating the issue, German Finance Minister Schaeuble stressed that this supervision will be limited to the banking sector. But European Commission spokesman Altafaj, who is Spanish, said the loan's disbursement will also be subject to the country hitting previously agreed macroeconomic targets.
Either way, traders were keen to get short again having been squeezed out on Sunday night and we’ve seen EURUSD all the way down to test recent lows around 1.2445. Strong support is expected between 1.2400-1.2435 and but plenty of sellers above 1.2525. EURJPY was also heavily sold but rallied when the IMF overnight said that they thought the Yen may be overvalued only for the pair to fall back again as EURUSD continued its decline.
EURGBP has seen a big sell-off all the way back down to recent lows around 0.8050 (GBPEUR up to 1.2422) as GBPUSD found some decent buying interest around 1.5500 before finally giving way.
Overall the Pound has fared ok as attention has been firmly on the Euro but we can expect it to come under examination again soon, starting with data due out at 09.30 BST.
Stock markets predictably also came off as the euphoria faded but, like the Euro, we’ve seen some consolidation off the lows this morning.
Today should see some good two-way business but there’s a bit of blood on the books despite the moves of the last 48 hours being fairly predictable. T’was ever thus.
England started their Euro 2012 campaign with a 1-1 draw against France having taken the lead and thereafter showing little to inspire, but solid enough overall. The group was made more interesting though with Ukraine’s 2-1 victory over Sweden to lead the table.
The 3rd Test v West Indies was understandably washed out, a bit like England’s performance, and we’ll now have to sharpen up before the serious business of taking on the South Africans later in the summer.
Meanwhile the rain continues to pour and the Euro’s finding a bit of support as I sign-off. Which one lasts the longest is this week’s hot debate!
Interbank Rates 08:43 BST
Today’s Data: BST
09.30- UK- Industrial Production / Manufacturing Production
13.30- US- Import Price Index
15.00- UK- NIESR GDP Estimate
19.00- US- Federal Budget Balance
00.01- UK- Nationwide Consumer Confidence
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