Daily Forex Focus – 30 January
European equities closed lower Friday, led by a -1.32% drop in the CAC 40 and followed by a -1.07% drop in the FTSE and AEX. The next chapter of the EU summit begins today, with the Greek situation considered the top risk to the Eurozone recovery. No deal has been reached between private creditors and the Government after weeks of haggling over the coupon and maturity of swapped bonds.
Fitch cut ratings on Friday, downgrading the debt of 5 Eurozone nations, with Italy and Spain facing the deepest cuts. This will affect this week’s forecast “29 billion in bond issuance starting with Italy auctioning “6 billion in 5 and 10-year notes later today. Nicholas Sarkozy imposed a 0.1% financial transaction tax in France yesterday but is meeting opposition from the financial community which is contesting taxation. EURUSD is ticking lower in the session to 1.3178 or down -0.32%.
After reaching 3-month highs last week, Asian stocks are displaying weakness, guided by the Nikkei which is -0.70% lower, followed by the Hang Seng and Australian ASX, down -0.49% and -0.29% respectively. China’s policymakers are holding off on reducing the bank reserve ratio with the central bank also leaving rates untouched as the Chinese seek to stabilize inflation and spur growth.
Neighboring nations have already moved to ease markets as India cut bank reserve requirements and both the Philippines and Thailand cut key interest rates. As Asian equities trend lower, copper has also taken a hit, dropping 1.21% to $3.842. Gold is marginally higher while Silver futures have dropped off -0.59% to $33.59 after last week’s meteoric gains.
U.S. GDP figures came in slightly below estimates at 2.8% versus 3.0% expected, signaling to investors a return to risk-aversion after highlighting threats to the American recovery. Even though housing data and employment statistics disappointed last week, there was a good rise in the Michigan Consumer Sentiment Index which points to an increase in both present and future expectations. Equities were mixed, as the Nasdaq appreciated 0.40% but the Dow Jones and S&P lost ground, closing down -0.58% and -0.16%. Natural gas has continued to rise, up 2.32% to $2.82/MMbtu while crude continues to flirt with $100/barrel, trading at $99.11. Sugar lost substantial ground on Friday dropping -2.10% to $24.21 as supply concerns eased.