Forex Forum @ ForexAbode

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Analysts: BoE may extend QE program

On Thursday, May 10, the Bank of England holds its monthly meeting. Some analysts expect the regulator to extend its asset purchase program tomorrow.

According to the BoE governor Mervyn King, the inflation in the U.K. is too high and the nation's economic recovery too slow. The annual rate of inflation, which was 3.5% in March, remains well above the BOE's 2% target. Mervyn King said last week that the current crisis is far from over.

Investec: In conditions of sticky inflation versus stuck economy the BoE may add another £25bn to its £325bn program of QE on its Thursday meeting. The committee will worry more about low growth than an inflation rate that is taking longer to come down than it predicted.

Capital Economics: The BoE may add £25bn to its asset purchase program in autumn.

Commerzbank: The BoE may adopt the wait-and-see approach: despite the fact that in a longer term the QE extension is possible, now we expect the bank to leave the room for maneuver in case if the markets require support.



Photo: Daniel Jones

http://www.fbs.com/analytics/2012-05-09/17566-analysts-boe-may-extend-qe-program

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Taylor: Greece will abandon euro in June

The resent changes on European political landscape made some analysts come up with more radical forecasts of euro’s future than they used to have before. For example, John Taylor, the head of the world’s largest currency hedge fund FX Concepts, now thinks that Greece may leave the euro area already in June.

The specialist warns that the nation’s government will soon have no more cash, while European institutions won’t be able to give it more money due to the emerging political split between France and Germany. Greece itself is in the situation of uncertainty: if the policymakers fail to form a governing coalition, there will be other Parliament elections in the middle of the next month.

“I think that people are feeling the implications of a Greek exit aren’t so bad. If Greece leaves the euro, Europeans will turn around and huddle together and say, ‘how do I help Portugal and Spain?” Taylor says.



Image from blogs.telegraph.co.uk

http://www.fbs.com/analytics/2012-05-09/17561-taylor-greece-will-abandon-euro-june

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Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: 1.2700 (large), 1.3000, 1.3050, 1.3065,1.3075 1.3095, 1.3105, 1.3210;
USD/JPY: 79.65, 76.75, 75.80, 80.25, 82.50;
GBP/USD: 1.6100, 1.6125, 1.6295, 1.6300;
AUD/USD: 1.0200, 1.0230, 1.0275, 1.0300;
AUD/JPY: 83.65;
USD/CHF 0.9100, 0.9250.

Have a profitable trading day!

http://www.fbs.com/analytics/2012-05-09/17564-key-options-expiring-today

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Deutsche Bank: outlook for USD/JPY

The yen strengthens against the greenback this week as the Japanese currency benefits from its “safe haven” status.

Analysts at Deutsche Bank, however, recently revised their forecast for USD/JPY to bullish after being bearish since 2008. They now expect the pair to rise to 82 yen by the end of 2012, compared with previous forecast 75 yen.

In their view, USD/JPY may strengthen in a short term, but the trend is descending.



http://www.fbs.com/analytics/2012-05-09/17563-deutsche-bank-outlook-usdjpy

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Euro may rise against… Aussie

Analysts at Commerzbank believe that the single currency may rise versus its Australian counterpart to 1.2906/1.3004 (200-day MA, 2010-2011 minimums, April 2012 maximum).

The specialists say that euro’s advance is likely to end there. However, if the resistance is breached, EUR/AUD may climb to 1.3111. The bank remains bullish on the pair in the short-term as long as it’s trading above 1.2646 (April 30 minimum).

According to the bank, if euro slips below 1.2646 and 1.2641 (55-day MA), it will slide to 1.2571 (April minimum), the level below which the pair’s prospects will become negative.



http://www.fbs.com/analytics/2012-05-09/17570-euro-may-rise-against-aussie

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Scotia Capital: better to sell EUR vs. GBP

Analysts at Scotia Capital recommend selling the single currency versus British pound as an alternative for trading volatile EUR/USD which has been fluctuating this year in the $1.30/35 area, so that many traders burned their fingers. “EUR/GBP is still really euro, but the risk/reward is better than with EUR/USD.”

The specialists note that Europe’s future looks dim in both cases: either the currency union will continue with austerity measures and there will be a long period of slow growth in the region, or it won’t, so the crisis will dramatically escalate. According to Scotia Capital, EUR/GBP will slide to 0.77 by the end of 2012.

http://www.fbs.com/analytics/2012-05-09/17568-scotia-capital-better-sell-eur-vs-gbp