Market Review May 11 2012
Economic Data for today
After a mixed day on the eco data front on Thursday, with trade balances from around the globe and unemployment reports, today things quiet back down, the calendar is very thin, except for data from China, which is already coming in with soft results.
Today, markets will once again focus of politics and debt in Greece, Spain and France.
Euro Dollar
EURUSD (1.2925) The has had relatively quiet Asian and European sessions and is entering the North American trading day, close to yesterday’s lows. Volatility is off of yesterday’s high and still within its four month range even as headlines remain terribly negative. This is positive. It is easy to build in the worst case scenario, but we do not think we are there.
Yes, Greece is under immense pressure; but with the EFSF committing to paying €5.2bn disbursement, most analyst agree that Greece has enough cash until the summer; leaving plenty of time for the current political crisis to play out. A coalition is unlikely, however it is now PASOK’s turn to make an attempt; failing this new election in June. This creates uncertainty, but does not cement a Greek exit. A May 8th Bloomberg poll suggest that investors are factoring in a 57% chance of a Greek exit of the EMU.
Again this would create uncertainty and likely weaken the EUR in the near‐term; however as difficult as this decision will ultimately be for the economy and people of Greece it is unlikely to bring about the collapse of the EMU or EUR
The Sterling Pound
GBPUSD (1.6127) • Sterling is flat as we approach the NA session, as the BoE remains on hold in the midst of a challenging economic environment given weaker IP data. Policy easing continues to be a challenging proposition for the BoE, as a result of elevated inflation in the UK, and MPC members are unlikely to argue for further stimulus in the absence of a decline in CPI expectations. The BoE’s inflation report, set for release on May 16th, will provide market participants with an updated outlook.
Asian –Pacific Currency
USDJPY (79.87) The yen holds its own, remaining strong as investors continue to move to safe havens. The USD also kept equilibrium. The BoJ said yesterday that they were watching closely for currency speculation. Data flowing from China this week continues on a negative bias.
Gold
Gold (1694.75) Gold slid lower as a sharp drop in the Euro and ended at $1589 an ounce yesterday. Problems in Spain’s banking sector and gloomy European equities kept Euro under pressure. The continuing political deadlock in Greece which has lead to fears of a default and exit from the Euro zone, put additional pressure on the currency. At the same time, physical demand is seen emerging from Asia as traders and investors hunted the low price advantages. Demand owing to peak marriage season in India coupled with Chinese demand held the physical market firm. At the same time, European Union leaders meeting on May 23rd will be a short term focus.
Crude Oil
Crude Oil (95.85) Nymex crude oil prices dropped by 0.4 percent taking cues from expectations that Europe’s debt crisis will worsen further coupled with rise US crude oil inventories which stood at its highest point in 22 years. Additionally, a stronger dollar index also acted as a negative factor for the crude oil.
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