Daily Forex Focus – 31 January
The EU continues to struggle with the Greek bailout as costs grow and Greece refuses a budget overseer as proposed by Germany. France also came into the fray, suggesting that Greece should also maintain its fiscal autonomy, even though the bailout size continues to grow. Stocks slid as Angela Merkel reiterated opposition to increasing size of ESM.
European indecision led stocks lower with the Spanish Ibex falling -1.62%. The French CAC was also down substantially, dropping 1.60% as Sarkozy’s plan to unilaterally institute a transaction tax in August is meeting serious opposition from banks. Portuguese debt is now trading at Eurozone highs with 10-year debt yielding over 17% and 2-year debt yielding over 21%. EURUSD tanked yesterday, losing over 100 pips before recovering, now trading at 1.3187. The SNB is facing a test to maintain the currency peg as EURCHF comes increasing close to the 1.20 level.
After comments from Greek’s Prime Minister about progressing debt talks, Asian stocks moved higher, with the Hang Seng appreciating 0.74%, followed by the Nikkei and ASX, gaining 0.39% and 0.17% respectively. Japanese factory output climbed 4% in December, putting up the best figures in 7-months as Thailand faces the worst flooding in over 70 years.
This has propelled the Yen higher, as USDJPY loses -0.16% to 76.23. Meanwhile, the Aussie-dollar is trending upwards after reports of land prices bottoming with foreign investors seeking deals on farmland.
AUDUSD is trading up 0.40% 1.0636. Copper weakened -1.6% yesterday but is unchanged in today’s session while Gold and Silver continue to move to the upside, increasing 0.21% and 0.19%.
U.S. stocks ended the session mostly unchanged, but marginally lower, as continued uncertainty with Greece caused traders to waver from risk-taking. The financial and energy sectors led equities lower as the S&P 500 fell -0.25% and the Dow Jones dropped -0.05%. Apple helped buoy the technology-weighted Nasdaq, which came back from lows to trade -0.16% lower. Federal Reserve data indicated that demand for business lending increased at the fastest pace since 2005, setting the stage for a possible turnaround in the small business sector. Cocoa futures dropped -5.24% yesterday after an epic run over the last few weeks, Crude oil gained 0.64%, trading at $99.41 as better than expected Japanese production figures propped up prices.