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Euro Fails to Reflect The Optimism Of Greece’s New Loan Payout

January 22, 2013 in Forex Fundamentals and News

EuroEUR/USD moved in tight ranges since the markets opened yesterday. The currency pair remained over 1.3300 with the low of past 28 hours at 1.3302 and high at 1.3332. A very narrow range considering the recent high volatility in the foreign exchange markets.

Greece’s New Loan Payout

The Euro zone finance ministers approved a payout of €9.2 billion to Greece in during this month.

“The Euro-group notes with satisfaction that the MoU milestones for January, agreed between Greece and the Troika, have been achieved. In particular, an income tax reform has been adopted and end-user electricity prices for low-voltage customers as well as the levy on renewable energy sources have been adjusted. We welcome the commitment of the government to adopt a simplification of the income tax code by spring.”, the statement from Euro group mentioned yesterday.

Out of the approved €9.2 billon, 2 billion euros will be in cash for Greece government’s budget requirements and 7.2 billion will be in bonds to recapitalize the Greek banks.

Installments and timelines

The EU finance ministers had approved a payout of €49.1 billion under the second bailout package during December 2012. Out of this EUR 34.3 billion was paid during the same month. With this month’s payout of EUR 9.2 billion, the balance of last month’s approved sum is 5.6 billion and that will be paid in two installments during the coming February and March.

During November 2012 the Greece government had got 2 extra years until 2016 for spending cuts and balancing the budget which has been a condition for the rescue plans. The December approvals of €49.1 billion payout came with 4 proposed installments over 4 months to keep an eye on the progress of Greece to meet the guidelines for the bailout plans.

Euro remains subdued

As the Euro group meeting continues and there are some expectations of clashes about the efficient channeling of the European Stability Mechanism’s € 500 billion rescue funds directly to the banks, the Euro has been subdued.  Since the markets opened yesterday, the currency pair has been running in very narrow ranges against all major currencies.

EUR/USD price action in narrow ranges

Since yesterday Euro has been running in a very narrow range against the U.S. Dollar. During past 30 hours EUR/USD has seen a volatility of only 30 pips. EUR/JPY has seen slightly more volatility since the markets opened yesterday. The pair tried to break over 120.00 psychological level again but failed at 120.24. The subsequent fall to 118.88 was rather sharp but since then the currency pair has entered a sideways mode and the price action has been staying below 119.68 and over 119.00. Euro had shown some continuing strength against the British pound yesterday when EUR/GBP went as high as 0.8421 but lost steam ahead of the psychological level of 0.8500. EUR/CHF, which had seen some unexpected upward gains to the high of 1.2569 had dropped to 1.2388 but has been staying in a tight range between 1.2453 and 1.2392.

 

EUR/CHF Breaks Over 1.2500 Psychological Level – Swiss Economy Updates

January 18, 2013 in Forex Fundamentals and News

EUR/CHF daily chart - The upward jumpEUR/CHF broke over the psychological level of 1.2500 during Asian trading session today. The pair went as high as 1.2569 which is the highest level May 22, 2011 and slightly below the 50.0% retracement of the downward move from 1.5140 of December 2009 to 1.0008 of August 2011. A move to 1.2575 will complete the 50% retracement.

The down trend which had started from December 2009 had seen the currency pair to touch a low of 1.0008 on August 9 2011 before the Swiss intervention came into picture. Swiss National Bank had announced a floor limit of 1.2000 for EURCHF to protect the exports  which make 50% of Swiss GDP. Swiss monthly exports had started falling from 2008 and had touched a low of 13563.1 Million Swiss Franc during August 2009. With 32% exports to Germany and 8.5% to France, Switzerland’s dependency on Euro zone is very high and a strong Franc was hurting the exports badly.

Investors’ risk appetite is on the rise

The fading concerns, at least for the short to near term, about the Euro crisis has been turning the investors towards risk assets with higher probability of higher gains.

EUR/CHF approaches the 50% retracement

EUR/CHF retracement

Switzerland – latest economic data

Gross Domestic Product

The latest GDP report of 2012 Q3 had shown and year on year increase of 1.7% when the GDP during Q3 had gone up to 149009.69 Swiss Franc. It was better than the Y-o-Y change during the first two quarters of 2012 which were 0.6% and 0.3% respectively but overall Switzerland’s GDP growth has shown indications of cooling down.

The following table shows the average of quarterly Y-o-Y change in the gross domestic product since 2000.

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Y-o-Y change in GDP 5.20% 2.50% 0.80% 0.80% 3.00% 2.90% 6.00% 6.40% 5.00% -2.40% 3.60% 2.20% 0.90%

The graphical representation of the average of quarterly Y-o-Y change in the gross domestic product since 2000

Switzerland GDP- quarterly year on year growth

Swiss unemployment rate rising again

The latest data of December 2012 showed 8.9% rise in the unemployment of year on year basis. The unemployment which had dropped down to 2.7% i.e. 2 years’ low had shown an increase again to 3.3% in December 2012.

Unemployment history chart

Switzerland unemployment

Consumer and producer price index

The latest data of December 2012 showed -0.4% drop in the consumer prices on year-on-year basis while the producer prices showed a growth of 1.3% during December.

Foreign currency positions with SNB

“The Swiss National Bank (SNB) expects to report a profit for the parent company of around CHF 6 billion for the 2012 financial year. Foreign currency positions have contributed approximately CHF 4.7 billion to the positive result. In addition, the rise in the gold price has resulted in a valuation gain on gold holdings of CHF 1.4 billion”, the press release of Swiss National Bank (SNB) mentioned yesterday.

In 2012 end Switzerland became the country with 4th largest foreign exchange reserves in the world.