Dukascopy Fundamental Analysis
EUR
“Over the next two years, the recession makes the [Portuguese] government’s deficit reduction plan much more challenging”
– Fitch ratings agency
Fitch ratings agency cut Portugal’s credit rating to junk status BB+ from BBB- on Thursday citing “large fiscal imbalances” and “high indebtedness across all sectors”.
USD
“We see little prospect that any policy action will meaningfully impact the housing outlook over the next year”
– Sam Bullard, senior economist at Wells Fargo
U.S. house prices will probably remain unchanged through 2012 and start recovering in 2012, believe economists polled by Reuters.
GBP
“We don’t see any significant improvement or a change in conditions coming soon”
– Ross Walker, an economist at Royal Bank of Scotland Group Plc.
U.K. third quarter economic growth was confirmed at 0.5%, according to the latest figures published by the Office for National Statistics on Thursday.
CHF
“European markets remain immensely fragile and at the mercy of the sovereign-debt crisis”
– Jonathan Sudaria, a trader at London Capital Group
Swiss stocks declined for a sixth consecutive day on Thursday after Germany Chancellor Angela Merkel once again opposed to introduction of joint euro-area bonds.
JPY
“Japan’s finances are getting worse and worse every day”
– Takahira Ogawa, director of sovereign ratings at S&P in Singapore
Standard & Poor’s hinted that new Japanese government led by Yoshihiko Noda hasn’t made enough progress in reducing public debt, a sign that the company may consider downgrading Japan’s credit rating.
Dukascopy Technical Analysis
EUR/USD
“Risk sentiment is still pretty poor as there doesn’t seem to be one clear solution that will be swift for Europe”
– St. George Bank Ltd. (based on Bloomberg)
Regardless of the fact that some of the indicators suggest possible reversal, EUR/USD is expected to maintain its current direction – down.
EUR/JPY
“Japan will not hesitate to respond to speculative currency moves to shield exporters from a strong yen”
– Jun Azumi, Japan Finance Minister (based on Reuters)
EUR/JPY has come under 103.08 support which implies the increasing possibility of a pair declining down to 100.77 in the nearest future.
GBP/USD
“We have the ammunition and a willingness to use that ammunition”
– David Miles, BoE Policy Ma ker (based on WSJ)
The currency couple is gaining bearish momentum as it has already penetrated 1.5463.
USD/JPY
“The yen is being bought in a flight to quality amid risk-off sentiment”
– Sumitomo Mitsui Banking Corp. (based on Bloomberg)
From below USD/JPY is underpinned by supports situated at 76.90/84, 76.22 and 75.94 thus dips are unlikely to appear on the chart today.
USD/CHF
“The U.S. dollar would get some support in this environment particularly, as the euro is out of favor”
– St. George Bank Ltd. (based on Bloomberg)
Present bullish impetus is expected to drag the price rather high – up to 0.9317 and ultimately up to 0.9341/99 where the latter level is likely to act as impenetrable impediment.
Expert Commentary
“The level of private debt is too high to be isolated from what is happening in the debt markets around the world”
As the Eurozone countries are still struggling with the debt crisis, Dukascopy is persisting to interview the experts in finance to learn information from the inside. Today we talked to José García-Montalvo, Professor of Economics at the University Pompeu Fabra, Spain, who shared his opinion on the recent news from Spain. Spain still has the highest unemployment rate of 25% in the EU and the newly elected g overnment has promised to rectify the problem.
“I think that Portuguese government should stop following the advice of the European Commission, ECB and IMF”
The contagion from Greek sovereign debt is spreading to other troubled Eurozone countries, such as Italy, Spain and Portugal. Dukascopy has conducted a string of interviews to disclose the situation from the inside and bring you the recent news and experts’ opinions on the matter. Today Professor Ricardo Cabral has put Portugal under scrutiny and unpicked the recent economic developments for Dukascopy clients.
What To Read Today
Europe
Fiscal Union Won’t Change ECB Stance: Merkel
German Chancellor Angela Merkel said alongside her French and Italian peers on Thursday that making progress to more fiscal union in the euro zone would not mean she would suddenly agree to euro bonds or changing the role of the European Central Bank.
USA
Moody’s warns U.S. not to skimp on deficit cuts
Moody’s Investors Service on Wednesday warned that its top credit rating for the United States could be in jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years.
Asia & PacificEurope
Japan’s October CPI signals deflation
Japan’s core consumer price index fell in October, signaling the return of deflation after fo ur months of price gains, and raising fresh doubts about the Bank of Japan’s claim of a trend change in the price environment.