Mike Paterson’s daily Forex brief
On Friday afternoon, the ISDA eventually made the decision after much deliberation (don’t know what took them so long) that the Greek deal forcing private sector investors to write off â‚¬ 102 billion, with more to come, effectively means they have triggered a “ credit event” i.e. defaulted. So at last the inevitable finally happened.
The market reaction though was muted as we wait to see exactly where this fall-out will have impact. Already there is talk of an Austrian bank needing a bail-out on the back of it, and the search will be on to see who else is going to come a cropper. The IMF is this morning reported to have halved its bailout contribution and is already talking about the need for a bailout number 3.
Prior to the ruling US Non-Farm Payrolls had come in at an impressive 227,000 and this, along with the fear of the ISDA announcement to follow was enough to send the USD higher with EURUSD falling 100 tics to 1.3115 and USDJPY rising 70 tics to 82.54.GBPUSD also came under attack and has so far been down to 1.5655.
Overnight we saw an attempt to send EURUSD lower through stop-loss sell levels around 1.3080-90 but the usual sovereign suspects have been in to hoover up a few for diversification and profit-taking purposes. So far any rally since Friday’s drop has been limited to current levels around 1.3135, but there will a few frustrated short-Euro traders around should we break higher through 1.3150.
EURGBP has settled back into another hole around 0.8370 (GBPEUR 1.1974) and overall the Pound is little changed.
China's trade balance plunged $31.5 billion into the red in February as imports dwarfed exports to leave the largest deficit for over 10 years. The jury is now out as to the extent to which weakening foreign demand or seasonal distortion drove the drop. Import growth of 39.6 % on the year in February was the strongest in 12 months, well ahead of the 27 % expected and more than twice the rate of export growth of 18.4 %. There is also an argument to be had that the import demand is to satisfy a growing domestic economy, but given recent data this seems most unlikely.
Little in the way of data today, but a note of housekeeping to remember that the US clocks went forward over the weekend so traders will be at their desks an hour earlier for a while.
What a great performance by England’s rugby new boys in Paris, while once again the Shrimpers threw away a lead with minutes/seconds to go having clawed their way back from 0-1. All of which paled into insignificance though compared to watching my son Jack score two stunning goals to secure victory for his team. One of the great joys of parenthood without a doubt.
Have a good week out there.
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