Forex Daily Review: EU Summit Possible Effects on EUR/USD

18 Oct 2012• Matti Williamson, FX and commodities analyst      S&P Downgrades Ahead of the Summit

Today's EU Summit is expected to draw the market attention in hopes that Spain may finally request financial aid to deal with its growing debts and perhaps Torika will surprise and announce Greece's problems are being resolved at a steady pace. Let's first recap what the market has to digest aside the EU Summit in Brussels.

S&P credit rating agency downgraded Madrid and Barcelona after country downgrade. Cyprus also took a hit from the US rating agency, reasoning the country's creditworthiness has deteriorated significantly. Cyprus' credit rating was downgraded from BB to B:

"We consider that deterioration in the banking sector's domestic loan book has increased uncertainties about the final cost of Cyprus' banking crisis, and the implications of this for the government debt burden. We are therefore lowering our long-term sovereign credit rating on the Republic of Cyprus to B from BB."

Greece and China GDP

It is also important to highlight that the Greek Finance Minister said the market should not keep its hopes high on today's EU Summit as an emergency meeting is due at the end of the month about Greece. China GDP came in as expected, which does not contribute to the positive sentiment in global markets as the GDP did contract from 7.6% to 7.4%.

There are really no major headlines that can assist the current uptrend in EUR/USD. Comments from EU leaders can generate bullish spikes in Euro-dollar but I would expect it to be short-lived as profit-taking is likely to materialize once the market is disappointed.
EU Summit Full Schedule

Below is the full timetable for the EU Summit for 18/10/12 - 19/10/12:

EU Summit Schedule for Thursday:

14:15-14:45GMT Arrival of members of the European Council at the Justus Lipsius building
15:00-15:30GMT Exchange of views with the President of the European Parliament Tour-de-table before the meeting
15:45-1800GMT First working session
18:00-2000GMT Working dinner
End of meeting Van Rompuy & Barroso press conference

EU Summit Schedule for Friday

07:15-07:45GMT European Council members arrive Justus Lipsius building
08:00-11:00GMT Second working session
End of meeting Van Rompuy & Barroso press conference
Followed by Working lunch of Heads of State or Government of Eurozone
End of meeting Van Rompuy & Barroso press conference

 

Spain Bond Auction

Forex traders will focus on the upcoming debt auction from Spain. Off-the-run 3-year 4.00% 2016 Bono, 4.25% 2016 Bono and 10-year benchmark 5.85% 2022 Obligaciones will be issued for between

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Forex Daily Review: The Netherlands 2012 Elections Effects on EUR/USD 1.2900

13 Sep 2012• Matti Williamson, FX and commodities analyst     

Following the 2012 Dutch elections, exit polls suggest that Mark Rutte's party (Party for Freedom and Democracy) is in the lead with 41 seats out of the 140-seats in Parliament. The victory however is limited as the left Labour Party, led by Diederik Samsom is expected to receive 40 seats. If that is the case it will be very difficult to build a coalition between the center-right and the center-left. This could actually weigh on the financial markets but the US Federal Open Market Committee (FOMC) announcement of a possible QE3 at 16:30 GMT with a press conference at 18:15 GMT could prevent deep losses across the board. EUR/USD is currently maintaining its gains above 1.2900. Traders should ask themselves for how long this may be in light of the Netherlands elections.

Fed QE3 or Empty Words?

As the market prepares for Ben Bernanke's press conference, the Wall Street Journal (WSJ) survey shows that 34 out of 47 analysts believe there will be QE3 today but the majority are skeptical whether it will actually have any benefits on the economy. The Fed in my opinion is likely to extend its low-rates pledge into 2015. If any QE3 is introduced, I will not rule out the possibility of any sterilization to the fresh funds, which may actually strengthen the US dollar rather than weaken the world's reserve currency.

SNB and Italy Bond Auction

At 07:30am GMT the Swiss National Bank (SNB) will announce its monetary policy with faint speculations that the central bank wishes to raise EUR/CHF 1.2000 floor. Following the SNB interest rate announcement, Italy's Dipartimento del Tesoro is due to tap its 3-year benchmark, 4.50% July 2015 for between

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