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Societe General: comments on EUR/USD
Technical analysts at Societe General claim that despite the negative event background the single currency keeps gaining versus the greenback.
In their view, the pair EUR/USD may rise to $1.3795 and even to $1.3850. The outlook for euro is positive as long as it’s trading above support at $1.3435.
Slovakia didn’t ratify the EFSF
Slovakia didn’t ratify the EFSF bill yesterday. The ruling coalition didn’t manage to gather enough votes from the Slovak parliament in favor of the measure: there were only 55 votes in favor, while the necessary majority is 76.
The other 16 member nations have already approved the bill, while the EFSF expansion has to be ratified unanimously.
Prime Minister Iveta Radicova was trying to persuade the lawmakers that the whole euro area is now in danger, so it’s necessary to unify efforts. As Radikova associated the EFSF vote with the vote of confidence to the government, the coalition collapsed. Still the Prime Minister who is leaving her post proposed a compromise that may allow the parties to reach agreement at the second vote that will take place in a few days.
Richard Sulik, leader of the dissident Freedom and Solidarity party, said that it would be better to allow Greece default rather than waste enormous amounts of money for loans that may never pay back. Sulik said that Slovakia’s participation in the bailout deal isn’t in proportion with its small economy and showed his intention to fight for changing that.
Never the less, some experts say that as the debt crisis is continuously deepening the plan might not offer enough support for indebted nations, especially taking into account the fact that the fate of such big economies as Spain and Italy may soon come at stake.
Deutsche Bank about yen as a refuge
Currency strategists at Deutsche Bank note that Japanese currency has depreciated during the last few weeks.
The pair USD/JPY kept trading sideways, but it seems that investors are no longer tempted to leave everything for yen assets: there have been foreign equity outflows, and foreign bond buying by the Japanese which weren’t of much help to yen so far.
The more important thing is that the declining current account surplus and low interest rates bring the situation in Japan closer to what’s seen in other developed nations.
The bank points out that the number of short positions on yen has increased. In their view, that presents an opportunity to resume buying yen and selling US dollar.
Senate rejected Obama’s job plan
More news from the policymakers: US Senate blocked Barack Obama’s $447-billion plan aimed to promote jobs creation. 2 Democrats joined the Republican minority criticizing stimulus measures for being costly and inefficient and voted against the bill.
The legislation includes the reduction of the payroll taxes for workers and employers and provides new funding for roads, bridges and other infrastructure. Parts of the plan may still be pushed through if Obama finds enough support for specific provisions.
US political parties can’t agree on the measures that could have to decrease the unemployment that stays at 9.1%. Republicans are in favor of permanent tax cuts and deregulation, while the President and congressional Democrats propose more federal spending and short-term tax reductions.
The inability of American lawmakers to reach agreement on the key economic and financial issues increased the uncertainty on the global financial markets making investors worry about the recovery prospects of the world’s biggest economy.
Greece: budget deficit in figures
During the period from January to September Greece’s central government budget deficit (without local authorities and social security spending) increased by 15% in comparison with the first 9 months of last year rising from 16.65 to 19.16 billion euro.
Greece’s debt load is expected to reach 173% of GDP in 2012 as its economy will shrink for the fifths year in a row.
Greece’s Cabinet approved a 2012 draft budget on Sunday which sees the next a deficit of 6.8% of GDP (versus the previous estimate of 6.5% of GDO) and 8.5% shortfall this year (versus earlier projection of 7.6% of GDP).
There are significant chances that the second bailout for Greece agreed on July 21 will be renegotiated. Greece is missing its budget deficit targets and the bigger the budget gap requires more financing, so the amount of loan (109 billion euro) has to be increased.
BNY Mellon: euro's prospects have improved
The single currency rose to the 3-week maximums versus its US counterpart in the $1.3820 area.
The markets are waiting for the European Commission President Jose Barroso to make proposals about the recapitalization of the regional banks, on Greece and the participation of private sector in the bailout and the EFSF. Barroso is expected to announce its plan speaking to the European Parliament at 3 p.m., as Bloomberg cites the information from the unnamed official.
There was also some positive data released in the euro area: industrial production unexpectedly rose in August adding 1.2% from July level and showing the biggest increase since November 2010.
In addition, the inspectors of Troika indicated yesterday that Greece will get an 8 billion-euro ($11 billion) loan at the beginning of November. More details here http://www.fbs.com/analytics/news_markets/view/8908.
Analysts at Bank of New York Mellon note that the level of uncertainty has subsided. Even despite the internal political tensions – Slovakia failed to ratify the EFSF extension (see http://www.fbs.com/analytics/news_markets/view/8911) – the prospects of euro area have improved in comparison with what was seen a week ago.
Bank of Montreal: USD/CAD may fall to parity
Canadian dollar strengthened versus the greenback making the biggest advance in 2 months as the markets seem to be optimistic on the plan of the European authorities to recapitalize banks.
The pair USD/CAD declined from 1-year maximum at 1.0657 set on October 4 to the levels below 1.0200.
Analysts at Bank of Montreal claim that loonie may reach parity versus its US counterpart.
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