The Euro continued its march higher as progress continues to be made in relation Greece and the debt swap deal with private creditors. The past week has seen Greek officials take part in negotiations with creditors represented by the International Institute of finance. The debt swap deal had reached a stalemate earlier this week when private creditors expressed their reluctance to accept rates deemed necessary by EU officials. However, reports from Greek officials suggest an agreement is close to being tied up where creditors will receive a much more manageable rate of around 3.7% - 3.8%.
The Euro’s demise has been on the back of the sovereign debt crisis in the region, with the added concern of contagion to the larger economies of the Eurozone. But the euro has found legs to form an impressive rally off the lows not seen since 2010 on the back of some reassuring bond auctions, which I might add continued today. Italy managed to successfully issue debt with borrowing costs at 6 month lows.
EUR/USD set a fresh 2012 high, edging closer to the 1.3200 handle. This pair is certainly not driven purely on Euro optimism. The dollar has sold off across the board since Wednesday’s Federal Reserve Rate Announcement. The Fed took a surprisingly dovish stand on monetary policy as they indicated rates would remain at low levels right the way through to ‘late 2014’.
The dollar has had the wind taken out of its sails completely as investors look elsewhere for yield, especially with cautious optimism out of Europe. The Fed have given traders the license to use the dollar as the funding currency of choice for potential carry trades with this announcement.
As if the Fed’s sucker punch wasn’t enough for the dollar today economic data showed the U.S economy grew at a rate of 2.8%, less than the 3.0% forecast. Softer growth in the 4th quarter saw the dollar spike upwards as trades sought the safety of the greenback. However, this was short lived as the dollar looks to finish the day down against the majority of currencies, including the Yen.
Usd/Jpy experienced heavy selling triggered by Wednesday’s rate forecast by the Fed, and exacerbated by today’s GDP data. Despite the strong moves down we are wary the pair is trading deep within intervention territory. Considering the Japanese economy posted their first traded deficit in 30 years earlier this week, coupled with chronic deflation, the BOJ and MOF have been extremely vocal in their disapproval of the Yen’s gains.
The Euro’s demise has been on the back of the sovereign debt crisis in the region, with the added concern of contagion to the larger economies of the Eurozone. But the euro has found legs to form an impressive rally off the lows not seen since 2010 on the back of some reassuring bond auctions, which I might add continued today. Italy managed to successfully issue debt with borrowing costs at 6 month lows.
EUR/USD set a fresh 2012 high, edging closer to the 1.3200 handle. This pair is certainly not driven purely on Euro optimism. The dollar has sold off across the board since Wednesday’s Federal Reserve Rate Announcement. The Fed took a surprisingly dovish stand on monetary policy as they indicated rates would remain at low levels right the way through to ‘late 2014’.
The dollar has had the wind taken out of its sails completely as investors look elsewhere for yield, especially with cautious optimism out of Europe. The Fed have given traders the license to use the dollar as the funding currency of choice for potential carry trades with this announcement.
As if the Fed’s sucker punch wasn’t enough for the dollar today economic data showed the U.S economy grew at a rate of 2.8%, less than the 3.0% forecast. Softer growth in the 4th quarter saw the dollar spike upwards as trades sought the safety of the greenback. However, this was short lived as the dollar looks to finish the day down against the majority of currencies, including the Yen.
Usd/Jpy experienced heavy selling triggered by Wednesday’s rate forecast by the Fed, and exacerbated by today’s GDP data. Despite the strong moves down we are wary the pair is trading deep within intervention territory. Considering the Japanese economy posted their first traded deficit in 30 years earlier this week, coupled with chronic deflation, the BOJ and MOF have been extremely vocal in their disapproval of the Yen’s gains.
