Intraday Market Thoughts

EUR Down on Fresh Rumours, NZD Knocked Around by IMF

by Ashraf Laidi
May 10, 2011 9:37

Euro continues to slide on fresh Greece rumours, sterling boosted byBRC sales, NZD knocked by IMF report & Australia and Chinese trade surpluses rebound. Higher margin requirements in oil.

EUR remains dragged down by uncertainty surrounding Greeces fiscal position after Standard and Poors downgraded its sovereign rating to B with a warning that further reductions could follow as the agency speculated that haircuts of between 50% and 70% would be required to make Greeces situation more stable. It is becoming increasingly accepted that further ECB rate hikes could increase the pressure on increasingly fragile peripheral nations and bring forward the likelihood of Greeces problems spilling over into Ireland and Portugal. This fear could slow down the pace of future rate rises as Europe wrestles with its debt problems.

GBP is boosted by BRC like for like sales for April, which showed a significant improvement, rising 5.2% against expectations of a rise of 2.5% and bouncing back strongly from Marchs 3.5% decline, suggesting that last months Royal Wedding and extended Easter break may well have brought the shoppers back onto the high street.

EURGBP looks set for test of 50% retracement level at 0.8700, of 0.8355/0.9045 up move.

The New Zealand dollar felt the effects of an unfavourable IMF report overnight which stated that the currency was up to 20% overvalued due to its high interest rates. Also, the March cash deficit was reported at NZD 12.41 billion, NZD 102 million more than was expected in December.

Australias trade balance for March showed a marked improvement jumping to a surplus of A$1.74bn from Februarys A$205m deficit, driven by increased exports of iron ore giving the Australian dollar a boost back towards the upper end of its recent range.

Key levels on the AUDUSD remain at the recent highs above 1.1000, with interim resistance at 1.0810.

Chinas trade balance for April also recovered from Marchs poor figure of $0.14bn. and a quarterly deficit, to show a surplus of $11.42bn, three times expectations, with imports falling back to 21.8% and exports coming in at 29.9%. These figures are expected to reinforce US concerns about Chinas policy with respect to its currency as the two countries continue their meeting to discuss ways of dealing with the current imbalances .

Last nights late 25% margin hike on crude oil by the CME could well limit further speculative upside in oil prices and as such weigh on commodity currencies like the AUD and CAD.

By KM - staff


Latest IMTs