IFX Market Report for 14/06/2012

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    British Finance Minister George Osborne said yesterday that Germany would make more concessions to save the euro if Greece was forced to abandon the common currency. In his opinion Germany would be more willing to bail out other countries if Athens left.GBPEUR took a steady drop throughout the day’s trading. Opening the markets at 1.2428, the rest of the day saw a gradual decline into the 1.23’s, finally closing at 1.2355. The drop in the GBPEUR seemed to derive from comments made by Alex Tsipras, head of the anti-bailout party where he mentioned that the EU will not cut Greek funds or eject Greece from the EUR.
    GBPUSD opened trading yesterday at 1.5572 trading in a tight range during the day’s trading struggling to break the 1.56 resistance, hitting the day’s high of 1.5597. Overnight and this morning the pair has again fallen off hitting lows of 1.5469.

    The British Pound is showing relatively firm correlations with UK bond yields and the MSCI World Stock Index, hinting the focus here is likewise the Eurozone debt fiasco and thereby the Greek election outcome


    The US Dollar fell against most of the majors as expected amid a recovery in assets linked to risk appetite last week. Risk aversion looks like it has made a come-back as investors turn defensive ahead of the weekend’s general election in Greece.

    The EUR had a good day against the USD, opening trading at 1.2528 the pair took a gradual rise throughout the day amidst poor US data that included retail sales falling for a second consecutive month and more positive news from the Eurozone. There remained an evident resistance at 1.26 where the high of the day reached 1.2599 before closing at 1.2584
    For the Euro, a firm correlation with German bond yields (see chart) points to the primacy of debt crisis concerns in shaping price action. Renewed sovereign stress in the Eurozone is likely to boost haven demand for German government debt, pushing yields and the single currency lower.

    With Europe’s debt crisis intensifying pressure on the Swiss National Bank’s 1.20 per euro ceiling after a breach in April, officials will today reaffirm their commitment to defend the limit.

    Industrial production fell in Spain and Portugal, two of the southern European countries engulfed in the region’s debt crisis, as well as in Italy, which is fighting to reform its economy and avoid the need for outside help. But Germany, the region’s industrial powerhouse, also saw production fall sharply, raising doubts about its ability to withstand the downturn affecting its weaker neighbours.

    German May inflation data was in line with previous estimates yesterday, coming in at 2.2% compared to May 2011. Prices dropped 0.2% on the month, the German stats bureau said. Falling energy prices contributed to the fall in inflation, offsetting a strong performance in the German labour market.

    Poland’s annual consumer price inflation rate fell more than expected in May, the country’s statistics office said yesterday, limiting expectations the central bank will raise rates in coming months.

    As widely expected, the Swiss National Bank retained its interest rate at zero percent this morning and the EUR/CHF floor at 1:20. Since that decision the Swiss franc has edged higher against its major rivals.

    Brazil’s real rose for the first time in three days on bets that tax changes may boost inflows into Latin America’s largest economy. The real rose 0.5 percent to 2.0575 per dollar. The currency reached a three-year low of 2.1062 on May 23 after appreciating to as strong as 1.6890 this year.

    Daniel Fountain / 13.06.2012

    Editor, Hotel Designs


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