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October/11/2011- Comments and forex-analytics from FBS

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October/11/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Oct 11, 2011 4:30 pm

EUR/USD: fundamental factors

The single currency approached the 3-week maximum versus the greenback as it’s testing the levels in the $1.3700 area.

It happened as the risk sentiment improved after Chinese state-run fund announced that it had started buying the shares of the nation’s biggest banks (Industrial & Commercial Bank of China (1398), China Construction Bank, Agricultural Bank of China and Bank of China). The fund intends to continue such practices without unveiling any details about the amount of investments.

Analysts at Nomura note that Chinese government regards the equities of the domestic banks as cheap and its demand will encourage the entire Asian stock market. The specialists claim that the market in the risk-on mode, so one should stay away from the refuges such as US dollar and Japanese yen and move to the higher-yielding ones. The MSCI Asia Pacific index of shares added 2.1%.

Yesterday the leaders of Germany and France pledged to come up with a plan to recapitalize the region’s banks by the G20 Meeting on November 3. At the same time, strategists at RBS doubt that European authorities manage to resolve all key issues by the end of the month.

The negative factor is that Slovakia’s coalition hasn’t managed yet to come to agreement on the nation’s participation in EFSF. Slovakia is the only member of the currency union that hasn’t ratified the measure (Malta did so yesterday). Today the nation’s lawmakers vote again. Analysts at National Australia Bank warn that euro may slump in case Slovakia’s parliament votes against ratification.

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Analysts about EUR/USD future

Many leading currency experts believe that the Federal Reserve will launch the third round of quantitative easing in order to encourage the national economy and that the greenback will stop strengthening.

Analysts at JPMorgan Chase reduced their average forecasts for the greenback in the fourth quarter from $1.3387 to $1.34 per euro and from 77.06 to 76.6 yen. In their view, the Fed may begin discussing QE3 by the end of 2011 and begin asset purchases at the beginning of the next year. The specialists expect EUR/USD to end the year at $1.38 and the USD/JPY – at 75 yen.

Strategists at Westpac think that the bears won’t be able to push EUR/USD below $1.30. In their view, the pair will trade at $1.31 at the year-end.

All in all forecasters surveyed by Bloomberg project euro to appreciate to $1.40 by the end of 2012. Never the less, there still are those who prefer US currency.

Economists at Credit Agricole think that the risk of recession is exaggerated. In their view, in the medium term the greenback would benefit from the fact that US economy is in the better condition than the other major economies. According to the bank, EUR/USD will end the year at $1.33 and then drop to $1.26 by the end of 2012.

Analysts at Wells Fargo say dollar will end the year at $1.32 per euro pointing out that they are more optimistic on dollar’s future than on euro’s prospects.

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Re: October/11/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Oct 11, 2011 4:33 pm

Mizuho: pound’s under pressure due to the weak data

UK economic data surprised to the downside: manufacturing contracted in August for the third month in a row declining by 0.3% versus the expected contraction of 0.1% confirming that Britain’s economic recovery’s under threat. In the second quarter the nation’s GDP expended only by 0.1% (q/q).

Last week the Bank of England raised the ceiling for bond purchases from 200 to 275 billion pounds billion pounds. According to the British Chambers of Commerce, additional monetary easing may not be enough to prevent recession, so there’s the need for more radical measures.

The pair GBP/USD dropped from 1-week minimum at $1.5688 to the levels in the $1.5630 area. If pound closes below 1.5500, it will slide to the key support at $1.5330.

Analysts at Mizuho Corporate Bank believe that by the end of 2011 sterling will fall below $1.50 versus the greenback and lower than 0.85 per euro.

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Trichet warns of systemic crisis

European Central Bank President Jean-Claude Trichet claimed that the euro zone financial crisis has become systemic and called for decisive political action.

«The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond,» claimed Trichet cited by Reuters.
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Re: October/11/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Oct 11, 2011 4:36 pm

Troika authorized sixth bailout tranche for Greece

The so-called Troika – the European Union, the International Monetary Fund and the European Central Bank – sanctioned providing Greece with the sixth tranche of the bailout package at the beginning of November. Now it depends on the approval of the Eurogroup and the IMF.

According to Troika’s statement, the indebted nation keeps making progress in such areas as fiscal consolidation, privatization, the banking system and structural reforms.

Never the less, Greek economic outlook is considered to be pessimistic: the recession will be deeper than it was seen in June and Greek economy will start recovering only in 2013.

Greece won’t be able to meet its deficit target this year, partly because its GDP keeps contracting. Inspectors claim that the nation will probably have to conduct additional measures.

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