Mike Paterson’s daily Forex brief
Not only does the Eurozone have to deal with the inevitable Greek exit and the current run on the banks (now spreading already to Spain where customers have pulled â‚¬1 billion out of Bankia) and discussed by my colleagues on these pages, we now have an equally serious issue whereby the Asian Central Banks (ACB’s), long-time natural buyers of the Euro as reported here, have turned into sellers.
I have long banged on about EURUSD being bought by the usual suspects, the ACB’s, in order to diversify their USD purchases when artificially weakening their own currency. Well now, with the Greenback surging across the board, these same ACB’s find themselves being able to sell USD to buy their own currencies back at advantageous levels and prevent them weakening excessively.
The downside of course is that they now have USD to buy back and sell the Euro which is capping any decent rally on any good news that might arise. Ok, so they’ve sold before in rallies, obviously, sometimes through the BIS, but the key point here is that all the while the US Dollar remains king ofÂ the stink heap the ACB’s will have less natural need to buy EURUSD and that doesn’t augur well…
As I mentioned yesterday the Greek elections have been set for 17th June and is now simply a vote for or against Euro exit. How do you like your cake exactly? Either way it’s not going to taste too good.
EURUSD had a small rally on short covering after the FOMC Minutes suggested further easing but has found aforementioned sellers around 1.2750 while EURGBP has maintained its rally off the 0.7950 base as the Pound came in for a little slap after the BOE’s inflation report.
Merv King yesterday lowered growth forecasts and painted a fairly gloomy picture even if he jumped on the “lets blame the Eurozone” wagon and we saw a sell-off in GBP across the board. At least however there seems to be an understanding, perhaps fear, that if the Eurozone goes down we’re in for a rocky time too.
GBPUSD has a key support line around 1.5885 and if that breaks we can expect an acceleration lower which should spread across all pairs. We’ve seen good sellers in the rally here too and we should expect the Greenback to prevail further. The USD Index, a tradable instrument, has seen 20-day highs and continues to find buyers on the dips.
Little in the way of data today but that’s not going to prevent the usual plethora of Eurozone rhetoric and traders will remain cautious in getting too exposed at this stage.
Which is more than I can say for the Shrimpers defence last night as we let in 2 goals to only manage a 2-2 draw against the lively youngsters of Crewe, and thus resign ourselves to another season in League 2..The play-offs are indeed a funny ol’ game but also a good leveller.. Still frustrating though to be in the top three ‘til March, miss promotion by 1 point and then get knocked out by a team that finished 11 points below us. Hey ho, I think the reality check tells us we’re not ready for the heady heights of League 1 again just yet!
And Mr Safe has picked a predictably boring England squad for Euro 2012 and left out Rio for "footballing reasons" (for more on this check out a great blog ) while the owners of Liverpool have decided Kenny has spent quite enough of their money thank-you. Perhaps they could melt down the Carling Cup…
Interbank Rates 08:48 BST
Today’s Data: BST
13.30-US- Weekly Jobless Claims./.Treasury Sec Geithner speaks
15.00-US- Philadelphia Fed Manufacturing Index
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