Unforeseen debt crisis in Europe?
While the European debt crisis is remaining the most popular concern among investors, Dukascopy has interviewed an expert in Political Economy, Grant Amyot, Professor of Economics and Political Economy at Queen’s University, Canada, to find out about the anticipation of the credit crunch.
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Fundamental market overview
Francois Baroin, France’s Finance Minister claimed that poor growth and volatile markets would not contaminate nation’s stable economic position. FM emphasized that France still has AAA credit rating despite euro area crisis. At the beginning of the month Sarkozy’s government approved austerity measures accumulating ˆ7 bn and downgraded France’s growth rate for year 2012 from 2.25% to 1%.
Worldwide demand for US equities, bonds, and other securities surged in September as investors relied on Treasury assets amid Europe debt crisis. In September net purchases of long term stocks, bonds and notes made $68.6 bn compared to $58 bn in August. Treasuries extended largest quarterly gain since 2008, indicating that investors appreciate its safety.
The Bank of England announced that UK economy might continue stagnation for at least half a year more. The bank decreased its growth forecast for the next two years to 1%. The inflation in the UK is about 5%, the highest among EU countries. However, analysts predict a sharp fall in UK inflation rate. Unemployment also is rising as number of unemployed grew by 129, since beginning of the summer to 2.62 million.
According to monetary policy statement Bank of Japan feared that Japan’s economic growth might be impacted by Eurozone economic difficulties and strong Yen. Recent figures show Japan’s economic growth is 1.5% in Q3. BOJ also announced no change in interest rates to stimulate growth. Current interest rate is between zero and 0.1%.
Official SNB exchange rate for EUR/CHF is at CHF 1.2390 today; 3-month LIBOR CHF remains at 0.05% (within target range of 0.00-0.25). Yields for 10-year Swiss Confederation bonds increased to 0.93% today. SMI stock index has gained 0.13% since opening bell, and is currently fluctuating around 5672 points.
Read the morning report here.
Daily maximum: 1.3556
Daily minimum: 1.3429
The Euro pursued moving in the bearish trend as the European debt crisis worsens, sending the pair lower, breaching the market mean at 1.3551.
While none of the resistance (1.3597; 1.3691; 1.3835) lines has been touched, after support 1 at 1.3453 was left behind, bearish investors might expect the pair move lower towards 1.3402 and 1.3258 respectively. The daily trading outlook is strongly bearish.
Daily maximum: 104.31
Daily minimum: 103.41
The single European currency continued moving downwards as investors remain concern over recent negative economic developments in Europe, causing EUR/JPY to cross the market mean at 104.50.
Resistance (105.11; 106.12; 107.71) levels were not tested today, while a cross of support 1 at 103.52 exposes two remaining support lines at 102.96 and 101.37. The daily market stance remains strongly bearish.
Daily maximum: 1.5815
Daily minimum: 1.5745
The British pound moved lower today as worries over the European Union economic stability intensified; in addition to that, the British economy posted the unemployment rate at 8.3% which is more-than-forecast.
Resistance (1.5889; 1.5977; 1.6111) lines remained intact today, whereas a breach of support 1 at 1.5756 exposes the last two support lines at 1.5710 and 1.5576. Meanwhile, the daily market stance is bearish.
Daily maximum: 77.14
Daily minimum: 76.86
The market mean at 77.11 has been touched in early Wednesday trading, though the pair commenced moving south as concerns over the EU debt crisis intensified.
None of the support (76.82/57;75.99) and resistance (77.41/74; 78.32) levels has been hit. The daily outlook remains bearish.
Daily maximum: 0.9222
Daily minimum: 0.9139
USD edged higher against the Swiss Franc today as more investors are turning to dollar and to Treasuries amid fresh concerns over last economic developments in Europe.
None of the support (0.9106; 0.9034; 0.8917) and resistance (0.9223; 0.9269; 0.938) levels has been tested so far. The daily trading signals point at a continuation of the bullish trend ahead.
Daily highs and lows are calculated till 16:00 GMT.
Read the morning report here.
Most important events of the day
Italian PM Mario Monti named a new government on Wednesday; investors hope that newly elected top officials in Greece and Italy will bring the national economies back to shape.
Italy’s Monti Names New Government
Prime Minister designate Mario Monti on Wednesday unveiled the list of ministers that will be part of his new emergency government, an administration of technocrats who have the delicate task of restoring investor confidence in the euro-zone’s third-largest economy and pull it out of the spiraling debt crisis.
The US economy indicates it is getting steam again: retail sales rose 0.5% in October and the labour market started gradually taking off, reducing the unemployment rate to 9.0%. The Fed expects it to reach 8.6% by the end of 2012.
Consumer Prices Fall a Bit, Though Food Cost Climbs
Consumer prices fell in October for the first time in four months, taking pressure off strapped households and giving the Federal Reserve more room to ease monetary policy if the economy falters.
Asia & Pacific
Japan’s economy grew 1.5% in the third quarter 2011, in line with estimates.
Bank of Japan Cuts Economic View on Global Slowdown, Europe’s Debt Crisis
The Bank of Japan cut its economic assessment as Governor Masaaki Shirakawa called the European debt crisis the biggest danger for the nation’s export-led recovery
Read full report here.