Daily Forex Forecast – 11 January
The renewed possibility of a framework for assisting troubled nations and strength in both financials and metals producers drove European equities higher yesterday, led by the Italian MIB up 3.08%. Italian Bank Unicredit bounced 6.7% after losing 60% of its market value in a week. Not far behind were the Euro Stoxx, CAC, DAX, and IBEX indices which were up 2.67%, 2.66%, 2.42%, and 2.34% respectively. Not all news was good as Fitch mentioned a possible Italian downgrade on the horizon and Austria’s debt auction came in weaker than expected.
Hungary is considering changing laws to enable aid from the IMF and Eurozone as debt concerns continue to mount. Capital outflows continued out of Greece, totaling “64.6 billion since 2010 and the ECB deposit facility climbed to a record “482 billion, effectively soaking up all the excess LTRO funds. EURUSD is trending lower to 1.2742.
Major Asian equity markets are mostly unchanged as positivity in the American economy was outweighed by concerns that Europe may be entering a recession. The Hang Seng and Nikkei are marginally higher, up 0.11% and 0.12%. The Nikkei is trending upwards on strength in financials but traders are carefully watching European bond auctions for signs of a global risk aversion. The Aussie-dollar was weaker against 15 of 16 major crosses as oil and copper fell.
Copper is down -0.53% to 3.4945 while oil has lost -0.39%, trading at 101.84. AUDUSD has is also move lower -0.2858%, trading at 1.0284. Gold has been the one bright spot, moving back above its 200-day moving average to $1,638.30.
American indices moved markedly higher yesterday led by the Nasdaq which increased 0.97% to 2,702.50. The S&P 500 rose to its highest level in 5-months to 1,292.08 with financials, commodities producers, and industrial stocks advancing higher. Yesterday’s 3-year note auction was a great success after $32 billion of debt was sold with the highest bid-to-cover on record of 3.73.
The debt-ceiling has nearly been breached once again and President Obama is pushing to increase the ceiling by $1.2 trillion. He is hoping to gain momentum and push this through Congress in the coming days. Meanwhile, Cocoa followed up yesterday’s strength with a renewed 7.5% surge as an imminent supply disruption from a Nigerian labor strike puts further pressure on the agricultural commodity.