Market Review June 15 2012
Equities and the euro were helped by reports that major central banks are poised to inject liquidity should the results of weekend elections in Greece unleash havoc on financial markets. The Asian equities are also trading positive due to the above reason. However, news of easing from the central banks has acted as a boost supporting gains in riskier assets including base metals and may restrict downside for the day. Fundamentally, the spot demand has deteriorated consecutively since the beginning of the month due to weak manufacturing and industrial activity and may continue to restrict much upside in today’s session. Even most of the banks from around the globe are reducing their forecast for the year due to rising economic uncertainty.
Nevertheless, most of the CPI releases from Asia to US has reflected lower inflation, may allow the central banks to take easing steps, and may continue to support gains in today’s session. From the economic data front, the Euro-zone unemployment is likely to increase along with weak trade balance. The US releases in the form of industrial production and empire manufacturing are also likely to decline along with Michigan confidence due to weak economic activity and may further support downside among metals pack.
However, hopes of easing and cheap money may continue to support buyers and may increase financing supporting gain commodities . Overall amidst, strong equities and increased hopes of stimulus from Central banks markets should relax ahead of this weekend’s Greek vote.
Euro Dollar:
EURUSD (1.2642) The euro held firm against the U.S. dollar on Friday, reflecting hopes of central bank action to counter potential fallout from Sunday’s crucial election in Greece, and after disappointing U.S. economic data.
G20 officials told Reuters that central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the Greek election result roils markets.
New claims for U.S. state jobless benefits rose for the fifth time in six weeks and consumer prices fell in May, opening the door wider for the U.S. Federal Reserve to further ease monetary policy.
These factors prompted unwinding of market players’ massively short positions on the euro, though worries about Spain’s troubles in financing its debt remained in place.
The euro traded at $1.2628, maintaining Thursday’s 0.6 percent gains and edging near a high of $1.2672 hit right at the beginning of the week in a knee-jerk reaction to the announcement of a plan to support Spanish banks.
The Great British Pound
GBPUSD (1.5554) Sterling fell against the euro on Wednesday as safe-haven flows exiting the euro zone and into UK assets eased, with investors preferring the U.S. dollar as nerves set in ahead of the election in Greece over the weekend.
The euro edged up 0.3 percent against the pound to 81.15 pence. It recovered from a two-week low of 80.11 pence hit on Tuesday when investors sought alternatives to the euro as Spanish bond yields rose.
The common currency has been stuck in a range roughly between 81.50 pence and a 3-1/2 year low of 79.50 pence since the start of May, and analysts said it was likely to remain trapped within a tight range before the Greek vote.
Asian –Pacific Currency
USDJPY (78.87) The yen strengthened against all of its 16 major counterparts after the Bank of Japan refrained from expanding monetary stimulus that debases the currency.
The dollar was set for weekly declines versus most major peers before U.S. data that may show production slowed and consumer confidence fell, adding to the case for further easing by the Federal Reserve. The central banks of major economies are preparing for coordinated action to provide liquidity if needed after the general election in Greece this weekend, Reuters reported earlier.
The yen jumped 0.6 percent to 99.66 per euro as of 1:51 p.m. in Tokyo from the close in New York yesterday. It climbed 0.6 percent to 78.87 per dollar after touching 78.83, the strongest since June 6.
Gold
Gold (1625.70) rose in electronic trading Friday, on track for a sixth session of gains, as the prospect of fresh stimulus underpinned demand.
Gold for August delivery added $6.00, or 37 cents, to $1,625.70 an ounce on the Comex division of the New York Stock Exchange during Asian trading hours. The metal is on track for a weekly gain of 2.1%
Crude Oil
Crude Oil (82.90) rose Thursday on thinking the Federal Reserve would take further action to bolster economic growth and OPEC left its production ceiling as is.
The Organization of the Petroleum Exporting Countries left its collective production ceiling unchanged, the 12-member group said in a statement released after its meeting concluded in Vienna.
July futures for light, sweet crude closed at $83.91 a barrel, up $1.29, or 1.6% on the New York Mercantile Exchange. It was trading around $82.90 before reports of the OPEC decision were released.
OPEC’s actual production has been above the official ceiling, according to a Platts survey of OPEC and industry officials and analysts, which shows output averaged 31.75 million barrels a day in May.
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