MORNING BRIEFING: Renewed Sell-offs for Euro

[RTFX-Trading]

MORNING BRIEFING: Renewed Sell-offs for Euro

[B][I][U]What’s new:[/U][/I][/B]
Euro Zone: Euro reaches lower in morning trading
Germany: German president unexpectedly resigns
China: Chinese PMI shows signs of easing momentum
Australian Dollar: RBA prefers to stay on hold – no changes in policy rates
[B][I][U]
Today:[/U][/I][/B]
[IMG]http://www.rtfx.com/images/news/CalE010610.gif[/IMG]


[B][I][U]Rates in Asia and Indices: [/U][/I][/B]
EURUSD: 1.2310 - 1.2245.
USDCHF: 1.1572 - 1.1524.
GBPUSD: 1.4543 - 1.4470.
EURJPY: 112.37 - 111.32.
USDJPY: 91.28 – 90.89.
DowJones: Closed
NASDAQ: Closed
S & P 500: Closed
Nikkei: 9'696.31 -0.74%
Shanghai: 2'559.58 -1.26%
Gold: $ 1'217.60
Brent Oil : $ 74.14

[B][I][U]
Comments: [/U][/I][/B]

German President Horst Kohler unexpectedly resigned yesterday evening citing a growing public criticism of some of his previous remarks. In times where sentiment tends to drive the markets, and with a growing number of economic and political challenges in Europe this might come as a signal of further instability in Europe’s largest economy. This reflected in losses for the Euro against the US Dollar in Asian trading.

The euro further declined this morning on worries sovereign debt problems might spread to the banking system. Reuters reports that the ECB warned that euro zone banks faced up to 195 bln euro in a second wave of potential loan losses over the next 18 months due to the financial crisis.

The euro also suffered as figures released yesterday showed lax inflation and poor confidence figures, since yesterday Americans and British were on holiday, there is a chance this negativity might be reflected today.

China’s PMI eased, suggesting overheating risk has likely been set back in China.

The RBA, as was expected, made no changes to its rate – staying cautiously on hold. This is another reflection of the concern for the global outlook. Bank of Canada interest rate decision is expected today, it is expected that BOC will be raising its rates from 0.25% to 0.5%. Anything that suggests that the Canadian economy is relatively immune to eurozone fallout will probably come as a support of risk appetite in general.

For the EURUSD pair further weakness is expected and the support that has held till now at 1.2150 remains in focus. At the time of writing EURUSD lies around 1.2194 and RSI breached the 30 level suggesting possible overselling of the pair.

Good day,


Rudolf Muscat

Trading desk

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