Daily Forex Focus – 1 February
The Euro plunged yesterday as more obstacles surfaced during Greek debt negotiations. At this point it is estimated that haircuts of over 70% should be expected considering the coupon, but there is a new twist in the form of a “GDP sweetener.” If the Greek economy does turn around, then warrants given to the bondholders would rise in value and compensate for risk, increasing returns for creditors. In the meantime, traders have been hammering the Euro with EURUSD tumbling below 1.31 to 1.3072. Portugal will be auctioning bills later today as the country faces the highest yields in the Eurozone debt arena.
Even though the country is ahead of meeting fiscal targets, there is a strong possibility of needing more bailout funds to avoid default. European indices were mostly higher, led by the 0.90% rise in the Dutch AEX and followed by the 0.78% rise in the Swedish OMX. The Spanish IBEX did trade marginally lower, losing -0.09%.
Chinese manufacturing data was surprisingly stronger as the January purchasing managers’ index rose from 50.3 to 50.5 (MoM). The Chinese government has not been easing like expected in anticipation of weaker industrial growth, but this proves that the caution was warranted as the housing market continues to cool.
Although initially trading higher on the manufacturing data, copper has since dropped -0.40% while Gold continues the march higher, adding 0.07% to $1741.60. The Nikkei is trading 0.17% higher while the Hang Seng is marginally stronger, rising 0.05%. The Australian ASX has shown weakness though, falling -0.68%. AUDUSD is also trending lower, but after falling 0.30% earlier, the Aussie-dollar has since recovered and closed in on today’s open price at 1.0622.
U.S. stocks finished yesterday’s low volume session mixed as the Nasdaq rose 0.07% while the Dow Jones and S&P 500 dropped -0.16% and -0.05% respectively. As the month closed out, the S&P 500 had one of the best starts in years after adding 4.40% and so far earnings have beat projections in 67% of companies that reported last month.
The dollar index ended down for the month, losing 1.1% in January against a basket of 16 currencies. Crude oil and natural gas are both trading lower, as energy products continue to be plagued by an economic slowdown and mounting supplies. Natural gas has fallen -2.20% while crude is still below $99 at $98.55/barrel. Wheat has been leading the agricultural commodity charge, rising 1.31% as global weather anxiety rises.