IFX Market Report for 15/06/2012

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    Following a string of recent weak UK data releases, a growing number of analysts are still wary of the pound on concerns that the UK economy will be hurt by the turmoil in the Eurozone, the country’s biggest trading partner.
    GBPEUR remained range bound ahead of key event risks over the weekend. Sterling traded at a low of a low of 1.2313 as the euro benefited from positive rumours regarding the elections in Greece.GBPUSD continued to be dominated by general risk appetite and rumours of further U.S Quantitative Easing. The resistance level of 1.56 remains the level to break, which if done will open up moves as high as 1.58. However while there is growing speculation of further asset purchases in the UK any rebounds could well prove short lived.

    According to a report by the Financial Times, the Bank of England and the HM Treasury will announce a credit-easing initiative aimed at boosting loans to SME’s in the UK

    The GBPEUR support level of 1.2320 held up well throughout yesterday but after speeches by Bank of England Governor King and UK Chancellor Osborne at the annual Mansion House meeting last night combined with inspired confidence in the Greek election meant trading has opened today at 1.2264


    Greek bank stocks were up almost 19% yesterday on talk that pro-bailout parties are likely to win the June 17th elections.

    Spain’s 10-Year yield hit an all-time high of 7% mark as Moody’s cut the region’s credit rating to Baa3 from A3, while Italian three-year notes yielded 5.30%, which compares to the 3.91% offered in May.

    A report by the Bank of Spain showed commercial banks borrowed a record €287.8bn from the European Central Bank in May amid speculation that the Governing Council will act in July as the outlook for the region turns increasingly bleak.

    Helped by U.S QE3 speculation and positive Greek polls EUR/USD recovered from a day low of 1.2543 to hit a high of 1.2620 by late afternoon – a resistance level that is unlikely to be broken ahead the coming critical weekend.

    While the market is not about to forget about the Eurozone crisis, a win for New Democracy may in the short term spark a healthy Euro rally.
    Moody’s predicted Irish home prices are due to fall 20% or more.

    In the US, Core CPI month on month data which looks at the change in the price of goods and services came out as predicted at 0.2%.

    Weakening US jobless claims as well as yesterday’s disappointing retail sales release weighed on the US dollar yesterday amid increased expectations of a more dovish Federal Reserve.

    After keeping Interest rates on hold on Thursday and reiterating their aggressive stance on the EURCHF floor, Chairman of the Swiss National Bank, Thomas Jordan has said he expects a significant slowdown In Switzerland’s Q2 GDP Growth.

    The Bank of Japan said it would leave its key interest rate at between zero and 0.1% but would also leave a 70 trillion yen ($885bn) asset purchase programme unchanged.

    Daniel Fountain / 14.06.2012

    Editor, Hotel Designs


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