Comments and forex-analytics from FBS Brokerage Company - page 88
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Danske Bank: yen will keep strengthening
Analysts at Danske Bank expect Japanese yen to keep strengthening versus the greenback due to its safe haven status and Japan’s current account surplus.
The specialists expect USD/JPY to renew the record minimum sliding to 75 yen in 3 months and to 74 yen in 6 months.
In their view, loose monetary policy of the Federal Reserve is going to be more aggressive than the one of the Bank of Japan. As a result, yen’s appreciation will be interrupted only by the occasional interventions, but their effect will be short-lived.
BoA Merrill Lynch: sell GBP/USD
Currency strategists at Bank of America Merrill Lynch note that the euro zone’s debt turmoil that threatens recession has a negative impact on the situation in UK as about 30% of the nation’s exports go to Europe and only 10% to the United States.
As a result, the specialists expect sterling to stay under pressure versus the greenback. The bank advises traders to sell GBP/USD in the $1.5800 area stopping above $1.6100. According to Merrill Lynch, in the near term the pair will slide to $1.54, while in the medium term it will be poised to hit $1.50.
The analysts note that the chances that British pound will be a safe haven from the European crisis are low.
UBS about Spain-related risks
Economists at UBS give 3 reasons to be concerned about Spain’s economic prospects: firstly, the high possibility that the country misses its deficit-reduction target, secondly, the risk of Spain’s falling into recession the next year and, thirdly, the precarious position of Spanish banks which will likely need more state money.
Spanish Finance Ministry announced that the nation’s GDP will add 0.8% in 2011 failing to meet the 1.3% growth target. Spain’s economy stagnated in the third quarter. The country’s jobless rate is close to 23%.
It’s too early to make predictions whether the deficit goal of 6% of GDP will be attained this year as the regions’ third-quarter budget data aren’t available yet. In 2010 Spain’s shortfall was equal to 9.3% of GDP.
Spain faces general elections on Sunday, November 20. The ruling Socialist Party is likely to lose to the opposition People’s Party which pledges to meet the deficit goal of 4.4% of GDP in 2012.
The 10-year Spanish bond yield rose to 6.4% for the first time since August. The specialists warn that the market’s rather optimistic attitude to Spain in comparison with Italy may change in the coming months or even weeks.
Capital Economics: the BoE will increase QE
The Bank of England reduced its forecast for UK economic growth in 2012 from 2% to 1% claiming that British economy will suffer from the euro zone’s debt crisis. The central bank also slashed outlook for CPI growth rate claiming that by the end of the next year inflation will fall from the current 5% level below the 2% target.
Economists say that although the BoE didn’t signal further easing the market now expects it to expand its QE program in 2011 by at least 50 billion from the current 275 billion pounds.
Analysts at Capital Economics think that the central bank’s inflation report suggests that rates will stay on the minimal levels for the foreseeable future and that British economy will likely need even more loose monetary policy.
The specialists think that even the revised forecast of the central bank seems to be too optimistic. In their view, Britain’s economy will stagnate in 2012.
Capital Economics projects the 75 billion pounds of additional asset purchases in February but adds that if the economic data remains weak during the next 2 weeks, the BoE will have to announce extra support already in December.
Analysts at Nomura expect the central bank to expand stimulus by 50 billion pounds in February and 25 billion pounds in May.
Analysts are still negative on euro
Spain’s borrowing costs rose to the maximal level since 1997 – the nation’s 10-year bond auction today has fueled concerns about the spreading of the European crisis to France and other core euro zone economies, such as the Netherlands and Finland.
Short-term forecasts
Morgan Stanley: negative outlook for the single currency. The specialists advise to sell euro targeting $1.31 lowering stops to $1.3580.
UBS: if EUR/USD breaks below support at $1.3406, it will begin declining to $1.3346.
Middle-term forecasts
Nomura: euro will slip to $1.30 by the end of the year, so it’s recommended to sell EUR/SUD.
Brown Brothers Harriman: the pair will finish 2011 at $1.29.
Mizuho Corporate Bank: euro will fall to $1.30 by the year-end, trading will be very volatile.
Citigroup: EUR/USD will decline to $1.31 by the end of 2011 and to $1.25 in the first half of 2012.
Merkel proposed to change EU’s treaties
German Chancellor Angela Merkel proposed today to change the EU's treaties making the European institutions able to intervene in national budgets in case deficit rules were breached. In her view, complaints should be brought to the European Court. Merkel thinks that the European Union needs greater integration.
Here are some of Merkel’s comments (from Reuters):
“I am convinced that only political solutions can resolve the situation… A breakthrough to a new Europe can only happen if we are ready to change our treaties.”
“This can be limited to euro states, it can be done in the form of a protocol ... it would be a very limited change to the treaty”.
“But national governments must be prepared to tie themselves to the community in a binding way.”
“There are ... many good political and economic reasons to further integrate the 27-member EU, as opposed to the 17-member euro zone”.
Westpac: AUD/USD trading recommendations
Technical analysts at Westpac expect AUD/USD to bounce to $1.0200. The specialists recommend selling Aussie on the rallies expecting the pair to drop to $0.9700. In their view, support at $0.9910 won’t be able to hold the bears.
Euro area: comments from the policymakers
AAA-rated European nations are beginning to express openly that they are against expanding rescue measures for the most indebted members of the currency union.
Jyrki Katainen, Finnish Prime Minister thinks that the euro area is running out of options to solve the debt crisis. Italy and Greece should act on their own to convince the markets that they are able to reduce the debt burden. Katainen says that the second bailout deal for Greece adopted on October 26 didn’t manage to calm investors: since that time Italian 2-year bond yields surged by 150 basis points. Germany and Finland both oppose the creation of common euro bonds.
France has openly called for the ECB to get more involved by issuing the European Financial Stability Facility (EFSF) a banking license that would allow it to refinance itself with the ECB liquidity operations. German Chancellor Angela Merkel criticized the proposition that the ECB has to become a lender of last resort. Reuters cites European and IMF officials who claim that the authorities discuss the possibility of the ECB lending money to the IMF, rather than any euro zone government that would help to get round the government restrictions.
The IMF refused to release the next portion of its loan to Greece until the nation’s Prime Minister Lucas Papademos wins broad political support for austerity measures.
Mario Monti, Italian Prime Minister pledged additional cuts to those targeted by Silvio Berlusconi.
World Bank President Robert Zoellick claimed that the nations from China to the United Stets may be willing to support Europe through the IMF if the euro zone’s policy makers agree on a plan to stem their debt crisis.
Options market expects euro’s slump
Wall Street Journal reports that 1-month risk-reversal indicator, which measures the weight of the bearish options bets on the single currency on the bullish ones, surged to 4 volatility points overcoming the level of 3.5 volatility points where it was seen at the peak of the financial crisis in 2008. That means that investors expect a sharp fall in EUR/USD during the next month.
Analysts at ING underline that rising yields on European bonds stirs up the market’s concerns. Specialists at Brown Brothers Harriman think that euro will react to the growing concerns about France, Belgium, Austria and other core countries that threaten to take the sovereign debt crisis to a new level.
Commerzbank: euro’s recovery will soon be over
The single currency is recovering versus the greenback: EUR/USD has managed to rise from the 5-week minimums in the $1.3420 area to the levels above $1.3500.
Never the less, technical analysts at Commerzbank expect euro’s recovery to be short-lived. In their view, risk aversion will remain strong and the bears will use the opportunity to sell the European currency on its advance against its US counterpart.
As a result, the bank recommends selling the pair in the $1.3650 zone. According to the specialists, resistance in the $1.3870/1.3900 area will cap EUR/USD for a long time from now.