Mike Paterson’s Daily Forex Brief

Yesterday saw the official launch of the European Stability Mechanism (ESM) at the Finance Ministers meeting in Luxembourg. It’s designed to provide bailout funds for struggling economies and banks, but traders seem to have given it a less than enthusiastic reception.

The ESM will have a lending capacity of €500 billion by 2014 and is a permanent fund that will eventually replace the European Financial Stability Facility (EFSF). The ESM will be a new EU agency and headed by Jean-Claude Juncker, PM of Luxembourg and Chairman of the Eurogroup. Countries will make their first contributions this week with Germany making the largest payment of about 27%of the total.

Markets seem to be telling us that the total of €500 billion is simply not enough despite the obvious trumpeting from EU officials, and doubts remain that it will do a job when the pressure increases.

EURUSD has fallen further to 1.2927, and we’ve seen selling in EURJPY, and EURAUD amongst others as traders re-assess what else is out there.

EURCHF had a sharp spike to 1.2144 in Asia following an announcement from major custodial banks that they will be charging for CHF deposits, but the pair has fallen back as Euro selling kicks in elsewhere.

Forex Update-The Economic Voice Limited

Forex Update-The Economic Voice Limited

EURGBP remains firm around 0.8070 (1.2390) having risen to 0.8100 (1.2345) overnight but this due to some reality-check comments from the IMF on the UK’s growth prospects and urging them to come up with a plan B. So much for George Osborne’s limp conference speech yesterday where he said the world looks to his government as a role model for dealing with its economic difficulties.

GBPUSD has fallen again to 1.6002 before finding a little support, but poor Industrial and Manufacturing Production data just out coupled with news of a widening trade deficit should keep the GBP bears happy for a while yet.

Today would have been John Lennon’s 72nd birthday. Lest we forget.

Interbank Rates at 08:42 BST

Currency Pair





EUR/USD 1.2927 1.2991 1.2907
GBP/USD 1.6018 1.6047 1.6002
EUR/GBP 0.8070 0.8100 0.8064
GBP/EUR 1.2388 1.2403 1.2343
GBP/CHF 1.5010 1.5026 1.4945
GBP/AUD 1.5685 1.5736 1.5646
EUR/CHF 1.2113 1.2144 1.2095
GBP/HKD 12.4187 12.4412 12.4064
EUR/HKD 10.0231 10.0795 10.0027
GBP/ZAR 14.1537 14.2931 14.1376
USD/JPY 78.28 78.44 78.22
GBP/CZK 30.8637 30.9463 30.7345

Today’s Data: BST

09.30-UK – Industrial Production / Manufacturing Production / Trade Balance

15.00-UK – NIESR GDP Estimate

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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