Mike Paterson’s daily Forex brief

The past 24 hours has since another round of USD buying as concerns increase over the state of European banks after the latest weekly statement published by the ECB.

The report shows that tens of billions of € funding support for European banks appears to have shifted to the ELA (Emergency Lending Assistance) programme of the ECB from the LTRO (Long-Term Refinancing Operations), an indication that some European banks may be in dire financial straits.

Spanish banks accounted for 27% of all ECB funding. If one or more of the Spanish banks were considered financially unsound or were short of eligible collateral that could explain the growth of the ELA and the shrinking of the LTRO.

Either way, Spanish government debt yields have risen and the spread versus German 10 year bonds continues to widen, currently to 523 basis points. EURUSD has been slapped through the strong 1.2500 support line and another large barrier option interest at 1.2450 has been broken this morning. I have been warning that although there were a few buyers around the rallies were getting weaker and weaker as more natural sellers emerge.

GBPUSD has also been hit down through 1.5600 to lows of 1.5562 thus far as once again traders favour the US Dollar in the Best of a Bad Bunch Awards, with Gold also being hit, currently down at $1547.

The Pound overall continues to trade sideways but interestingly EURGBP has not had the drop that some were expecting on the back of these latest Eurozone banking concerns. This suggests of course, as I’ve been saying for ages, that the markets are starting to understand the impact on the UK if matters worsen, which seems inevitable.

UK lending data just out is slightly better than expected but traders are unimpressed. Not much else out today but ECB President Draghi speaks this afternoon on top of all the other rounds of rhetoric we’ve come to expect from EU principals.

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

I don’t see a change to this current sentiment anytime soon, although I’m happy to hear your arguments to the contrary.

Talking of which my comments yesterday on the saturation coverage of the Olympic torch relay produced more reaction from you than any other topic in recent memory. Thus proving that as we continue in global meltdown mode, it’s obviously the little things that matter most!

Stay safe out there, as indeed Uncle Roy seems to be doing judging by his final England football squad numbers submitted yesterday….. Yawn…….

Interbank Rates 07:17 BST

Currency Pair

Current

Overnight

High Low
EUR/USD 1.2445 1.2506 1.2438
GBP/USD 1.5576 1.5645 1.5562
EUR/GBP 0.7990 0.7998 0.7978
GBP/EUR 1.2513 1.2536 1.2500
GBP/CHF 1.5028 1.5056 1.5014
GBP/AUD 1.5946 1.5975 1.5869
EUR/CHF 1.2009 1.2014 1.2008
GBP/HKD 12.0760 12.1295 12.0652
EUR/HKD 9.6507 9.7036 9.6244
GBP/ZAR 13.0633 13.0886 12.9727
USD/JPY 79.34 79.59 79.29
GBP/CZK 32.0189 32.1650 31.8145

Today’s Data: BST

09.30-UK- Net Lending to individuals / Mortgage Approvals / M3 Money Supply

15.00-US- Pending Home Sales

16.30-EU- ECB President Draghi speaks

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

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 mike.paterson@economicvoice.com
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.

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