Mike Paterson’s daily Forex brief

With the BOE and ECB yesterday acting as expected (as per my updates) markets got a little excited once again by talk of a Greek debt deal, but once again the news was more bluster than substance.

Comments made by ECB President Draghi at the press conference seemed to give a green light to a solution by implying that the price at which the ECB transfers its bond holding to the EFSF is the issue, not the transfer itself. If it transfers the bonds to the EFSF at a loss, it is a monetary contribution to Greece. If they transfer them at a profit, it is a distribution to member states, which the ECB does annually. Perhaps he set the stage for unloading the Bank’s Greek bonds but it all comes down to price still.

Greek PM Papademos said he had agreed an austerity package with his own party leaders after Draghi’s comments and the Euro staged a quick rally but ran out of steam as it soon appeared the Germans and others were still sticking to the existing criteria. So much for talk of a Thursday deadline to be met. Now it’s moved to Sunday but in real terms there is another two weeks set aside for this from the Troika.

EURUSD has failed to hold above 1.3300 again but still finding support in the dips, EURGBP is still well sought but failing to hold above 0.8400 at the moment, while GBPUSD has been down to 1.5766 after failing to hold support levels but is also finding support for the moment.

Anyhow, far more important to the global scene was last night’s data out of China whose imports, led by iron ore, fell sharply in January by over 15% compared with last year. Chinese exports were also lower than expected at -0.5%.The trade surplus increased sharply on the lower imports, $27.3 billion with the Q4 current account surplus coming in at just under $60 billion. This dramatic slowdown has rightly sent alarm bells ringing all over the region and indeed globally for obvious reasons already discussed in my updates, and whilst the data cannot always be trusted there is a pattern emerging for sure.

Forex Update

Forex Update

The Aussie $ has been the major casualty thus far falling to 1.0678 versus the US $ from highs well above 1.0800 and to 1.4804 against GBP from lows of 1.4627. Other commodity currencies have suffered too and the weak data has also put a break on rallies in the equity and gold markets. EURAUD is higher too as is EURJPY as sellers of the Yen come back in also on the back of the Chinese slowdown and lack of momentum in the Eurozone.

Little in the way of data this morning but this afternoon sees US Trade Balance and Fed Chairman Bernanke once again stepping up to speak so we should see some frantic Friday action before the day is out.

And hopefully we’ll see the mighty Shrimpers pick up maximum points in games tonight and Monday to maintain their challenge at the top of League 2. And if you really want to share this journey then you can tune into the game away to Gillingham on Monday night nominated as the big live match on a channel to which I have always refused to subscribe on a matter of principle. But rhymes with lie, appropriately enough.

Have a great week-end whatever the weather allows.

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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