Morning Forex Review – 26 January
Greek debt negotiations resume later today as creditors and government officials are still hindered by the proposed coupon payment. The cost of not compromising and swapping existing debt continues to rise and weigh on an already fragile Europe. Portugal is forecast to require an additional “30 billion to help refinance existing private sector debt while Spain is eagerly seeking additional ESM capitalization above the proposed “500 as financial woes continue to mount. Equities were mostly lower yesterday, led by the Swiss SMI down -1.01% and the Swedish OMX which erased -0.78%. The German DAX was slightly higher after a better than expected improvement in the Ifo release, moving German equities higher 0.04%. EURUSD was mostly weaker yesterday, but rose back above 1.30 after the Federal Reserve’s policy statement, settling presently at 1.3111.
Asian stocks continued their ascent, extending gains to 3-month highs as the Hang Seng reopened and led equities higher, rising 1.16%. The Federal Reserve’s decision to keep rates at lows for an extended period reassured markets and increased the possibility of further easing by the Chinese Government to fight declining growth. The Australian dollar was a top performer yesterday, and continues to advance after the FOMC meeting, rising to 1.0610 or 0.22%. The New Zealand Dollar is also stronger after last night’s decision to hold rates constant at 2.50%. NZDUSD is trading up 0.0753% to 0.8174. The Japanese stocks are the one weak spot in Asia as concerns about Europe sink the Nikkei -0.32% today and increases the strength of the Yen. USDJPY is trading down -0.0701% to 77.726.
The FOMC meeting proved to be a main event this week with all 17 members releasing forecasts of the federal funds rate to the public. The bulk of the opinions pointed to raising rates no sooner than 2014. Growth was also revised downwards from 2.5-2.9% to 2.2-2.7%. The dollar has so far been crushed, as the dollar index declined below the 50-day moving average, remaining under a key resistance level at 79.838. American markets responded by pushing higher, led by the Nasdaq rising 1.14% and followed by the S&P 500 which rose 0.87%. Natural gas continues to bounce, increasing 0.77% to $2.75/MMbtu. Gold is also higher, outpacing S&P 500 returns by 5% in fiscal year 2012. Gold is presently trading at $1715.90 or up 0.76%.