euro group meeting to give markets short term direction
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Market attention is now directed toward the next press conference that will be given by the Eurogroup finance ministers. Some possible points of discussion include bank recapitalization and repayment terms for the next tranche of Greek bailout funds. Risk sentiment has been steadily improving over the last few sessions as equity markets in Asia and Europe are mostly pointed higher. The EUR/USD is seeing some lift at 1.3890-1.3770 while the USD/JPY trades toward the lower end of its weekly rand at 76.60-76.85.TRANSCRIPT
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Euro Group Meeting to Give Markets Short Term Direction; Policy Stance from the BoE Changes to Dovish
Market attention is now directed toward the next press conference that will be given by the Eurogroup finance ministers. Some possible points of discussion include bank recapitalization and repayment terms for the next tranche of Greek bailout funds. Risk sentiment has been steadily improving over the last few sessions as equity markets in Asia and Europe are mostly pointed higher. The EUR/USD is seeing some lift at 1.3890-1.3770 while the USD/JPY trades toward the lower end of its weekly rand at 76.60-76.85.
Macro data during the US session will come in the form of the University of Michigan consumer confidence survey, and this is expected to show some recovery from the previous month. The data is likely to take a backseat to statements from EU officials as the debt problems remain the market’s primary focus. The US Treasury Secretary (Geithner) also made comments, saying that most of the larger European economies should be protected from most of the negative effects from debt contagion.
In England, one of the BoE’s most hawkish members (Weale) released a statement which showed that his bias for policy tightening has shifted, which increases the likelihood that we could see additional QE stimulus if consumer price data shows that inflationary pressures have reached their peak. Also supportive of this was his suggestion that the risk of recession has become more probable in the last few months, so it appears that the central bank could be showing more concern for growth prospects and that additional stimulus might be necessary.
In Switzerland, the recent decision by the SNB to peg its currency to the Euro at 1.20 could remain in place for years and in order to maintain this rate the SNB will likely to make massive purchases of foreign currencies. Some analysts have suggested that the SNB’s foreign reserves could potentially double to $500 billion in the next 5 years. The implications of this event could be huge and the shifts in SNB reserve diversification now have the potential to be one of the main drivers in currency markets.
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