Inside Currency

Draghi Disappoints the Markets

squaremyles — Fri, 03 Aug 2012 07:58:03 +0000

So after all of Draghi’s optimistic and bullish comments of last week, indicating he might introduce some dramatic measures to stabilise the Euro and more importantly the Euro zones soaring bond yields he…………did nothing.

Off the back of his strong words last week Draghi seemed to back track yesterday and talk his way out of the difficult situation he got himself into. After saying he would do ‘whatever it takes to save the Euro’ last week the markets were expecting he may show full force at yesterday ECB meeting, this was not the case. Draghi seemed to just reiterate everything we already knew, this sent the Euro spiralling against the Pound and the USD.

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Super Mario Draghi’s Big Day

squaremyles — Thu, 02 Aug 2012 08:05:19 +0000

In what is being the called the most anticipated ECB press conference to date, Mario Draghi is expected to do one of two things.

Either he follows up last weeks comments, ‘I will do whatever it takes to protect the Euro’, with some real fire power and outlines plans for the ESM to receive a banking licence. This coupled with a pick up of the bond buying programme could bring the ‘all needed’ confidence back to the euro zone. These two would surely bring down the ailing Euro zones bond yields cost, which as of late have been soaring.

He could do all of the above or (the more likely in my opinion) nothing, Draghi put himself into this difficult position as the markets now awaits and anticipates he may do something but I feel his powers are limited.

The Euro over the past week has strengthened considerabley against a basket of currencies off the back of Draghi’s comments, if he doesn’t produce what is now expected of him we could see a very disappointed market, and in turn see the EUro loses the gains it has been building over the past week.

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Spain Recession as Expected, All Eyes on Italian Bonds

squaremyles — Mon, 30 Jul 2012 07:55:23 +0000

Thursdays comments from Mario Draghi brought support to the Euro basically stating he will do whatever it takes to protect the Euro, this saw it clamber from lows against the Pound and the USD. But the gains were partially erased on Friday when Spanish unemployment came out worse than expected at 24%.

In a joint statement from German Chancellor Merkel and Italian Prime Minister Monti, they will do ‘everything possible to protect the Eurozone’. The sentiments followed on from Mario Draghis last week. US treasury secretary Timothy Geithner will be visiting Germany and the Finance Minister Wolfgang Schaeuble plus the day after in Frankfurt to meet Mario Draghi, any comments from any of these meetings may support the Euro.

So, this morning, as expected the Spanish Q2 GDP figures came in at -0.4%, further decline from Q1 of this year. It could have been a lot worse if you consider the unexpected drop in the UK seen the week before last. The Euro has held steady but all eyes will no doubt be on the Italian Bond market today as they sell off 3, 5 and 10 yr bonds. Their Yield has been rising steadily all year (not as wildly as the Spanish), but has still showed some worries, they have previously touched levels seen as unsustainable by many. They are expected to get a lot of attention for the bonds but it will be at what cost that drives the direction of the Euro for the rest of the day.

A business sentiment index will be released today that will give some insight into experts opinion and outlook of things to come.

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Super ‘Mario Draghi’ing the Euro On

squaremyles — Fri, 27 Jul 2012 08:23:53 +0000

EUR

Comments from Mario Draghi yesterday picked the Euro up from its slump against a majority of currencies. His strong words were essentially the ECB will do everything and anything in its power to not let the Euro fail and new initiatives will be succesful. The Euro actually rose by 1% against the USD on the day, considerable movement in the grand scheme of things.

It is also crunch time for Greece this weekend as they are to outline in full why they deserve the final tranche of their bailout. Draghi also commented on Greece stating, ‘actions speak louder than words’, and without an impressive performance from their PM Samaras, Greece may be left without the funds they need and be swiftly exiting the Eurozone.

USD

The US has quarter 2 GDP figures expected at 1:30pm UK time, a positive result could see a rally for the USD, it is expected to show a slight decline but still expansion, it seems like this may be the main driver for Friday for an array of currencies as data is particularly light across the board.

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GBP Battered by GDP

squaremyles — Thu, 26 Jul 2012 08:03:20 +0000

Yesterday we saw GDP figures QOQ and YOY show a significant decline, in fact three times less than expected. QOQ came in at -0.7% rather than the expected 0.2%, this set GBP/EUR to have its largest fall in 3 months and it lowest for two weeks against the USD.

Despite this knock I still belive Sterling has more room to climb against the Euro as the Debt Crisis heats up again, and I believe we aren’t far off some radical steps being introduced to quell the problems. A group of Pro-Euro German economists actually said yesterday that it is failing and described Europe as ‘Sleepwalking towards imminent disaster’, they calculated that if the break up of Europe were to happen the Germans were stood to lose out on approximately £2.3tn (€3tn).

Ewald Nowotny, ECB member, publicly stated yesterday one solution would be to give the European Stability Mechanism a banking licence, allowing them access to funds quicker rather than the politics that are involved currently. This did bring some brief respite to the Euro against a basket of currencies but nothing compared to the losses it has taken in the last few weeks. This idea though is one that would bring some immediate relief to the struggling peripheral Eurozones, but it comes at a cost to the stronger states. The collective Eurozone has failed together and no single states should be blamed, they now need to stand together or take a leap of faith, a balanced decision by many at the moment.

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Tagged: Bailout, buying a foreign property, Buying abroad, Buying Dollars, Buying Euros, Buying Sterling, Contagion, Currency Market, double dip recession, economy, EUR, Euro collapse, Eurozone, Eurozone collapse, foreign exchange market, Greek Exit, politics, Selling Euros