Posts Tagged "euro crisis"

Euro and the ESM – a long way to go

Posted by on Sep 7, 2012 in Commentary, Featured, Market News, News

Euro and the ESM – a long way to go

Yesterday’s announcement of unlimited support for the Euro from the ECB was widely expected. Indeed, the leaks have been coming as often as the rain showers. The pre-conditions for the buying of government bonds was also widely trailed. So yesterday’s announcement by Mario Draghi was just the confirmation of what we already knew. The ECB would buy unlimited short dated bonds from governments in financial trouble, as long as those governments confessed and accepted the road of supervision from institutions such as the IMF. This announcement was aimed at preventing Spain and Italy from wreaking havoc in the Eurozone. Yesterday, the value of the Euro flickered but remained largely unchanged. This suggests the move was largely priced in by the markets already. So far, there has been no sign that Spain or Italy are going to seek assistance. So the reality is yet to play out. A far greater test to the Euro stability could come as early as Wednesday next week, when the German constitutional courts make their ruling on the legality of the ESM, the European Stability Mechanism. This is the fund at the heart of the bailouts. Were the German courts to rule against the German contribution to the ESM, the whole Euro project would start to unravel again very quickly. Germany contributes just over a quarter of the €450bn. Although a ruling against is unlikely, the court may impose conditions. That could then lead to more uncertainty. Less than a week to go now to find out the next step in the Euro...

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British summer and Draghi

Posted by on Aug 3, 2012 in Commentary, Market News, News

British summer and Draghi

A week ago, Mario Draghi, the head of the ECB was in London giving a speech. During that speech, he heaped support on the Euro project and actions in the pipeline to support it. It was not a case of doing something, but whatever was done would result in the end of the Euro crisis and there was no need to short the Euro any more. Wow. A week later, the ECB held its monthly meeting and was widely expected to do something. No-one knew what exactly, but it had to do something. The speech of last week caused a huge rally in the value of the Euro and a significant easing in the interest rates paid by Spain and Italy. Come the hour, it was a case of light the blue touch paper and retire to the sidelines to watch the display. We waited a long time and still nothing except talk. The inevitable damp squib followed. If talk of action moves the market one way, lack of action can just as easily move it the other way. That is precisely what happened next. The Euro fell, interest rates rose, stock markets sold off. It was another example of why the Euro crisis persists. Everyone knows that something needs to be done. But no-one is actually doing it. Yesterday’s conference by the ECB had much in common with the British summer this year. It promised so much, we all had high hopes. The reality is pretty miserable and it never seems to change. At least we can congratulate our Olympians who put in a fantastic performance...

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Waiting for Godot … or trading the Euro

Posted by on Aug 2, 2012 in Commentary, Market News, News

Waiting for Godot … or trading the Euro

Or is it waiting for Mario? The minutes coming from the meeting of the Fed yesterday did not give the markets the stimulus they were hoping for. There was a general acknowledgement that things are slow in the USA and everything is under close scrutiny. This could be loosely translated as jam tomorrow. No stimulus today, but maybe tomorrow. All eyes turn to the ECB now. After Mario Draghi’s comments last week, the market expects to see just what was meant by “everything in our power to save the Euro and it will be enough”. A drop in interest rates won’t qualify, as that is just business as usual. There has to be something of a “shock and awe” content to today’s announcements and the implementation has to be NOW, not sometime in the future once a new treaty is ratified by all member states. If Mario delivers, we can expect a rally in the value of the Euro. Otherwise, it is likely to start heading south again. Until the non-farm payroll figures tomorrow that is. My weekend has started already, I’m an observer on the sidelines through this and will resume trading the Euro once the dust settles...

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ECB impact on GBPUSD

Posted by on Jul 27, 2012 in Commentary, Featured, Market News

ECB impact on GBPUSD

ECB Impact on GBPUSD On 20 June, I wrote about central bank power and the impact the ECB can have on the currency value. This was in evidence again this week on Thursday, when Mario Draghi, the head of the ECB, stated they would do “whatever it takes” to save the Euro. I have chosen to illustrate the impact of his speech on GBPUSD, rather than the Euro. The 4 hour candle on EURUSD was 199 pips in range. The candle length for Cable was  232 pips. In either case, very significant movements. One of the “excuses” for weak GDP figures in the UK has been the turmoil in Europe and the Eurozone. For any disbelievers, the market response to Mario Draghi’s speech provides compelling evidence of the impact of the Euro on the value of sterling and the UK economy. For anyone watching the market this Friday afternoon, the value of the Euro has continued to rise on the back of weak GDP figures from the USA, with EURUSD now trading more than 300 pips above the lows established earlier in the week. What do you predict for the ECB...

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After the Euro summit

Posted by on Jul 5, 2012 in Commentary, Featured, Market News

After the Euro summit

After the Euro Summit How quickly news drops out of the headlines. It was only a week ago that Eurozone leaders met for another in the series of Euro summits to save the Euro. Expectations were low, lower than a snakes belly in fact. Then something miraculous happened, an announcement of progress towards banking union. The markets immediately pushed the value of the Euro higher. Banking union is one of the pillars required to support a currency. One currency, one central bank standing behind it, with the central bank in turn monitoring and regulating the activities of the individual banks in it’s currency area. The outcome will normalise the currency, making it the currency of the “United States of Europe”. The markets have been very muted since the initial response, with the Euro drifting back towards 1.25 against the US Dollar. Yet interest rates in the “troubled” economies of the Euro area dipped. These seem to be contradictory messages and perhaps give an indication of the difficulties ahead. Today, both the ECB and the Bank of England meet to set out their respective responses to the weak economic backdrop. The ECB is expected to drop interest rates to a new all time low of 0.75%. The Bank of England is expected to create another GBP 50 billion of money for the economy. It would not be a massive surprise to me if either of these expectations were exceeded. Tomorrow is Non Farm Payroll in the USA. Once these figures are out of the way, we can get on with trading again. A more detailed examination of the Euro proposals has to follow in line with...

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