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Flash: Is the ECB Going to Adopt a Negative Deposit Rate? - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that ECB President Draghi raised the possibility of a negative deposit rate at the ECB meeting earlier this month.
They feel that if the goal is to help revive lending, especially to small and medium sized business and improve the transmission mechanism of monetary policy, then they expect a serious analysis to highlight the risks and downplay the likely benefits. That said, they write, “As ECB President Draghi has surprised many observers with his boldness (such as unwinding both to Trichet's rate hikes in his first two meetings) and his ability to innovate (two LTROs and the OMT).” At the same time, they note that OMT has worked by brandishing it, not actually deploying it and the dramatic success that moral suasion was not lost on Draghi. They write, “We suggest the negative deposit rate is more like the OMT than the LTRO.”
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May 28, 2013
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GBP/JPY extending losses
FXstreet.com (London) - The pound is continuing to be prodded with the ugly stick and wasn’t able to hold onto yesterdays performance to the crosses 154.60 high.
From the bear’s perspective, GBP/JPY is heading towards 152.00. The pair is testing 153.20 resistance in an overall broad bearish trend from the lows of 152.40. Momentum indicators offer impetus for the bears with hourly MA’s signalling towards lower levels. The dollar crosses are testing 1.5000 in Sterling and has completed an ascending triangle pattern in the Yen, neither look too well for the cross.
In a dollar positive environment, it appears that the pound is suffering with a backdrop of poor sentiment for the economy. With a light calendar for the rest of this week, support is 152.70 and 152.00 and 154.60 as resistance.
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May 29, 2013
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EU extends budget deficit reduction targets for six Member States
FXstreet.com (Barcelona) - According to the economic guidelines for the 27 EU Member States, published by the European Commission on Wednesday, more emphasis should be put on measures aimed at spurring growth in the area, rather than on austerity.
“Now is the time to step up the fundamental economic reforms that will deliver growth and jobs, which our citizens, especially our young people, anxiously expect,” European Commission president José Manuel Barroso said at a press conference following the release of the national budgets review.
“This is the only way to address the two lasting legacies of this crisis – the serious loss of competitiveness in many of our Member States, and persistent unemployment, with all its social consequences.”
Brussels announced that six EU countries had been granted more time to bring down their budget deficits below the 3% of GDP limit. France, Spain, Poland, Slovenia will have two more years for implementing structural reforms while the Netherlands and Portugal were given one extra year.
At the press conference José Manuel Barroso said that France is expected to use the additional time to realize labor and pension reforms and deal with its economic competitiveness problems.
On the other hand, the European Commission recognized Italy's success in reducing its deficit below the 3% limit and eliminated it from the list of EU countries under the 'excessive deficit procedure' together with Hungary, Latvia, Lithuania and Romania. Barroso stressed however that the country should continue carrying out its austerity program, as its national debt still exceeds 120% of GDP.
EU leaders are expected to give the green light to the recommendations during the June summit.
Marc Chandler, Global Head of Currency Strategy at BBH comments on European Commissions decisions: “Barroso wants countries to use the 'grace period' to take the structural reforms necessary to boost competitiveness. This of course is easier said than done. What needs to be done seems clear. We think that World Bank's Doing Business studies offer insight into low hanging fruit to bolster entrepreneurial activity, from easing the procedures and costs to start a business, register property, through closing businesses. The problem, at the risk of over simplifying, political in nature--the balance of power between rent seekers and profit-seekers.”
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May 29, 2013
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Flash: BoJ fails to create waves – Deutsche Bank
FXstreet.com (Barcelona) - In Japan, 10yr JGB yields are up 4bp as they edge closer to the 1% mark – Kuroda's speech at a BoJ conference had little effect on markets with the Governor's key message being that no financial system is perfect in the face of global uncertainty.
In other BoJ-related headlines, there were some interesting comments PM Abe's economic adviser, Koichi Hamada, who was quoted as saying that Korea "shouldn't blame" the Japanese central bank if Korean growth slows due a weaker yen, but instead "they should demand the Korean central bank have a proper monetary policy". Hamada also urged Kuroda to ease monetary policy further should it be needed.
According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The news comes as PM Abe unveiled a 5yr plan that details a number of structural reforms to achieve growth, but the issue of corporate tax rate cuts is reportedly undecided at this stage.” Attention then shifted to the BoJ's meeting with JGB-market participants later today, which may provided more detail on the central bank's upcoming market operations.
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May 29, 2013
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EUR/USD edges higher as US data disappoints
FXstreet.com (Córdoba) - EUR/USD bounced from session lows and spiked to the 1.2980 area after data showed US GDP was revised slightly lower to 2.4% from 2.5% in Q1, while jobless claims unexpectedly rose to 354K last week.
Soft growth and employment data undermined expectations that the Fed could begin to taper its bond buying program and weighed on the greenback, which was staging a mild comeback ahead of the data.
EUR/USD rose nearly 30 pips within the last minutes, but has been capped by 1.2980 so far. At time of writing, EUR/USD is trading at the 1.2970 zone, where it is still up 0.2% on the day.
On the upside, immediate resistances are seen at 1.3000 (psychological level) and 1.3020 (200-day SMA), while supports are seen at 1.2930/20 (daily lows/100-hour SMA) and 1.2880 (May 28 low).
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May 30, 2013
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EU to lower the tax on financial transactions
FXstreet.com (Barcelona) - According to Reuters, the EU is considering considerably scaling back the financial transactions tax, in the light of the banking sector's and the UK's firm opposition towards the measure.
European officials plan to impose a small levy of 0.01% (compared with the previous proposition of 0.1%) initially only on share transactions. After assessing the first impact of the FTT it will be decided whether other types of products should be taxed as well.
Under the current proposition, the EU would raise only up to 3.5 billion euros a year, instead of 35 billion euros, as initially planned.
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May 30, 2013
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EUR/JPY testing higher
FXstreet.com (London) - The EUR/JPY has rocketed from 130.20 to test 132.00 throughout the European day.
The EUR/USD has drifted higher nicely while the Yen has also gained some 180 pips on the day, moving well away from the 100.00 mark which was anticipated from overnight moves lower. EUR/JPY is still some way off from the top side of the previous ascending trend line and downside risk applies with closes below 131.60 and 132.50 resistance lines set up last week as a double top before the break of the supporting line.
The majority of the market is not expecting the ECB to follow through with the mentions of negative interest rates, for now. Meanwhile, Japanese officials speaking of late have had little calming effect on JGB or equity markets.
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May 30, 2013
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USD/JPY crumbles to 100.31/34 after personal spending in US
FXstreet.com (Barcelona) - The USD/JPY has weakened Friday, as the mounting pressures against the USD continue during US trading.
Following a break below the 100.54 support, Mataf.net analysts identify the next short-term supports at 99.83, ahead of 99.2. On the ascension, short-term resistances for the USD/JPY at 101.88, then 102.51, and finally 103.22
In the United States, Personal Spending (April) fell -0.2%, against expectations of +0.1%. In addition, Core Personal Consumption Expenditure – Price Index (YoY) climbed +1.1% in April, vs. projections of +1.0%. Finally, Personal Income (MoM) was reported at 0.0% in April, against estimates of +0.1%.
At the time of writing, the pair is operating at 100.31/34, notching a sizable decline of -0.39% Friday. According to the Technical Analyst team at ICN.com, “The USD/JPY’s attempt to the upside yesterday remained limited below 102.00 bringing negativity back, and today we find the possibility of extending the intraday downside move valid especially that the pair is trading below 101.70. Breaching 102.00 still represent a catalyst failing the intraday negative expectations.”
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May 31, 2013
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EUR/USD keeps 1.3000 after US PCE
FXstreet.com (Barcelona) - The euro remained apathetic after the US inflation figures, in terms of the PCE, came in below market forecasts during April.
In fact, the Core Personal Consumption Expenditures posted an annualized increment of 1.1%, a tad higher than the median, while the rest of the readings came in below forecasts. The headline advanced 0.7% on a yearly basis and contracted 0.3% inter-month. Further data showed that Personal Income came in flat while Personal Spending contracted 0.3% during the same period.
The pair is now losing 0.37% at 1.3001 and a violation of 1.2965 (MA21d) would target 1.2934 (low May 30) en route to 1.2931 (MA10d). On the other hand, resistance levels line up at 1.3062 (high May 30) ahead of 1.3072 (61.8% of 1.3243-1.2796) and then 1.3114 (MA100d).
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May 31, 2013
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Flash: USD/CHF could extend correction with push below 0.9527 – UBS
FXstreet.com (Barcelona) - UBS Strategists, Gareth Berry and Geoffrey Yu take a technical perspective at today's majors and outline the technical positions.
Beginning with the USD/JPY, the potential is for extension of the correction phase. The next important support is at 99.58 ahead of 97.02. Resistance is at 101.80 ahead of 103.74, suggesting a neutral outlook.
As for the GBP/USD, “There is a major resistance at 1.5308. As long as this holds, the pair is vulnerable as bearish conditions prevail and a break below 1.5111 would expose 1.5009, suggesting a bearish near-term outlook.” Finally, regarding the USD/CHF, with bull trend in place, the recent downside move should be limited in time and extent, which has tested support at 0.9527. A closing break below would prolong the correction to 0.9431. Resistance is at 0.9651 ahead of 0.9791.
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Jun 3, 2013
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