FXCC Market Review July 06 2012

Jul 6 • Market Reviews • 1575 Views • No Comments

Ireland returned to public debt markets following an almost two-year absence after European leaders took steps to ease the financial burden of nations that received bailouts. The National Treasury Management Agency sold €500m of bills due in October at a yield of 1.80%, the first auction since September 2010, the Dublin- based.

Fewer Americans filed first-time claims for unemployment insurance payments and companies added more workers than forecast, easing concern the labor market is faltering further. Applications for jobless benefits fell 14,000 in the week ended June 30 to 374,000, Labor Department figures showed today.

Private employers expanded payrolls by 176,000 last month, according to figures released today by Roseland, New Jersey based ADP Employer Services.

European stocks advanced after China cut its benchmark interest rates for the second time in a month and the Bank of England restarted its bond-purchase program. The European Central Bank cut interest rates to a record low and said it won‟t pay anything on overnight deposits as the sovereign debt crisis threatens to drive the euro region into recession. Policy makers meeting in Frankfurt today lowered the ECB‟s main refinancing rate to 0.75% from 1%.

The Bank of England, which has been drawn into the scandal over Barclays Plc‟s rigging of Libor rates, today raised its target for bond purchases by £50 bn (USD78 bn) to £375 bn.

China cut benchmark interest rates for the second time in a month and allowed banks to offer bigger discounts on their lending costs, stepping up efforts to reverse a slowdown. The one-year lending rate will fall by 31  bps and the one-year deposit rate will drop by 25  bps effective tomorrow, the People‟s Bank of China said. Banks can offer loans of as much as 30% less than benchmark rates.

Euro Dollar:

EURUSD (1.2381) The euro was little changed as the ECB announced its rate reduction by 25bps, but markets began to sell off when they realized that the ECB had also reduced their deposit rate to 0. Later in the day, ECB President Draghi gave his statement which was so dovish and pessimistic that the bottom fell out of the euro.

The Great British Pound

GBPUSD (1.5527) The pair was saw little change after the BoE added 50billion pounds to its asset buying program, but the strenght of the USD later in the day pulled the pound down.

Asian –Pacific Currency

USDJPY (79.91) The yen had gained on the positive effects from the bank rate reduction, but as the euro tumbled in the latter part of the day, the USD soared outpacing the yen.

 

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Gold

Gold (1604.85) followed the markets downwards after positive responses from the ECB and BoE and a surprise rate reduction in China, but as the Chinese released a statement that they may fall short of their 2012 figures and President Draghi, painted a negative picture of the EU, gold tumbled.

Crude Oil

Crude Oil (86.36) Crude inventories showed a small drop after deductions for lower production and lower imports during the month, but the tension with Iran allowed speculators to keep prices upwards. Negative comments from China and the EU should see prices fall with lower growth comes lower demand.

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