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September/06/2011- Comments and forex-analytics from FBS

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September/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Sep 06, 2011 9:05 am

TD Securities, BarCap: RBA didn’t cut rates

The Reserve Bank of Australia decided to leave the benchmark interest rate unchanged at 4.75%.

The RBA Governor Glenn Stevens said that the domestic outlook is strong enough and the nation is still benefiting from a mining boom, though the situation at the global financial markets remains extremely uncertain, so it’s not appropriate either to increase or reduce the borrowing costs. It’s necessary to note that the central bank still regards inflation as a problem and sees it rising above the target level.

Analysts at TD Securities believe that the next move of the RBA will be to the upside though the market is pricing in the rate cuts. The specialists make such assumption due to the solid prospects of Australia’s main trading partners, primarily China.

Strategists at Barclays Capital share this point of view. According to them, Australia’s strength is coming from high domestic demand and as commodity prices.

Economists at NAB think that the RBA may stay on hold until the middle of 2012 when they expect the economy to start growing at above trend rates.

The pair AUD/USD hit the minimal level in more than a week at $1.0489 on the concerns about the European debt crisis and its negative impact on the world’s economy.

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UBS about the euro zone's future

Analysts at UBS believe that the current structure of the European Monetary Union and its current membership aren’t suitable for the common currency. The specialists claim that either one or the other will have to change.

According to the bank, the most likely outcome is the slow movement towards the some kind of fiscal integration in Europe. The break-up of the currency bloc would be more costly and quite unlikely, UBS says.

The economists note that countries can’t be expelled, but sovereign states could choose to leave the euro area, though the consequences of such step in various discussions seem to be underestimated.

If one of the stronger core nations such as Germany quitted, that would lead to the corporate default, recapitalization of the banking system and collapse of international trade and cost 6,000-8,000 euro for every German in the first year (20-25% of GDP) and 3,500-4,500 euro per person per year thereafter.

UBS also warns that the union break-up may threaten to cause some form of authoritarian or military government or a civil war.

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Re: September/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Sep 06, 2011 9:24 am

BBH, Socgen: negative outlook for euro

Analysts at Brown Brothers Harriman note that the lack of action from the euro zone’s authorities begins erasing the line between a banking crisis and a euro crisis. In their view, political protectionism amid solvency problems of the peripheral nations ruin euro's defenses by undermining the proposed extension of the EFSF (European Financial Stability Fund) and the ECB's government bond purchases and increasing the risk of a disorderly default in Greece.

The recent strengthening of EUR/USD was due to the expectations of policy containment of global risks, but European political tensions and the discouraging US labor market data released on Friday deprived the European currency of this kind of support.

If Europe's credibility crisis enters a state of no confidence to both economic governance and political unity, it would be very hard for euro to hold above $1.40. BBH is sure that euro will ultimately fall to the 200-day MA at $1.4013.

Currency strategists at Societe Generale note that the single currency looks very vulnerable without the support of the hawkish European Central Bank. In their view, if EUR/USD drops below $1.3900, it would be poised down to $1.3000.

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Re: September/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Tue Sep 06, 2011 3:56 pm

Commerzbank: comments on EUR/CHF and USD/CHF

Technical analysts at Commerzbank believe that the longer-term outlook for EUR/CHF remains positive: the pair is on its way up to 1.2346/1.2400 (December 2010 and March 2011 minimums and June 2011 peak). Then euro will advance to the 55-week at 1.2668 and then to this year's maximum at 1.3245. In their view, the recent decline of the single currency from August 29 maximum at 1.1971 to minimums in the 1.1000 was only a correction.

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Chart. Daily EUR/CHF

As for the pair USD/CHF, for the outlook to become bullish the greenback has to break above the 50% Fibonacci retracement from December 2010 maximums at 0.8567 and June maximums at 0.8575. US dollar will be supported at 0.8375, 0.8250/40 and the top of the previous trading channel at 0.8200.

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Key events for the euro area this week

Tuesday. The finance ministers of Germany, the Netherlands and Finland are meeting to discuss collateral for loans to Greece. Earlier Finland has proposed that Greek state assets be transferred to a Luxembourg-based holding company and held as security for new loans to Athens.

Wednesday. Germany's constitutional court will rule on the legality of euro zone bailouts. The court's judgment will settle whether Chancellor Angela Merkel's government breached the German people's property rights in agreeing to the initial bailout of Greece in 2010, whether the nation’s authorities should have asked the parliament before taking part in the bailouts of Ireland and Portugal and whether the European Central Bank's purchases of government bonds are legal. The possibility that the court rules the aid for euro zone partners as unconstitutional is low, but it may force German government to seek for the Bundestag’s approval of future loan packages. That would slow down the process of combating the euro area’s debt crisis.

Thursday. There’s the European Central Bank’s meeting. The ECB is expected to signal the pause in its rate tightening cycle. The Minimum Bid Rate is announced at 3:45 pm (GMT+4).

Friday/Saturday. Finance ministers and central bankers of G7 nations are meeting in Marseille, France. If no solution comes, the market will suffer greatly.

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