Forex Forecast

Dovish BoE The pound came under pressure after the BoE’s Quarterly Inflation Report surprised the markets with a weak inflation projection. The BoE sees UK CPI near 1.6% in 2 years time, down from 1.8%. Cable dropped to 1.5900 and EURGBP came close to touching 0.80 as wider risk aversion kept the dollar in demand […]

Dollar Strengthens Sentiment took a turn for the worse overnight when the Wall Street Journal reported that depositors withdrew EUR 0.7 bn from Greek banks on Monday alone. The dollar continued to strengthen across the board – even against the yen and gold.

Euro Slump “Unfortunately, the country is on the road to elections under very negative conditions”. So said PASOK head Venizelos after a two-hour meeting of five party leaders which yielded no breakthroughs in forming a new government in Greece.

Euro Consolidates Some supportive growth data in the Eurozone stabilized FX markets on Tuesday, with the euro pushing back slightly to 1.2850. The Eurozone avoided a technical recession, with Q1 numbers showing the economy flat-lined on a q/q basis.

Italian Banks Downgraded Moody’s downgraded the ratings of 26 Italian banks at the end of the US session as part of a wider review of the ratings of 114 European banks. The ratings agency cited “increasingly adverse operating conditions”, “mounting asset-quality challenges” and “restricted access to market funding”.

EUR Remains Heavy The failure of China’s weekend RRR cut to improve market sentiment and the ongoing political uncertainty in Greece conspired to keep the euro on the back foot, with EURGBP looking particularly heavy.

Grind Lower Continues The grind lower in the euro continued on Monday, while risk assets were generally under pressure. The Australian dollar dipped below parity for the first time this year despite China’s weekend RRR cut.

AUD Dips Below Parity The Australian dollar dipped below parity for the first time this year despite China’s weekend RRR cut. Ongoing concerns about Chinese growth continue to weigh on AUDUSD, and political stalemate in Greece is not helping either as the prospect of a re-election continues to undermine global risk appetite.

Jobs Boost For CAD Amid all the concerns about the Greek political situation, Spanish banks and weaker than expected Chinese data, the Canadian employment report served up a positive surprise that pushed Canadian yields higher and USDCAD below parity in short order.

Growth Clouds Gather Risk appetite was relatively stable in the European session, following a cautious Asian session. There were few major developments in Greece, though SYRIZA leader Tsiparas is due to make a statement at 2pm Athens time. Fotis Kouvelis (Democratic Left party) said repeat elections are unavoidable unless SYRIZA changes its stance.

Greece Still In Focus The Australian dollar started the Asia session on a weak note, after news of a trading loss at a US bank sent S&P futures lower. The euro also came under significant downside pressure later, falling to a new three-and-half-month low against the dollar and eventually bottoming out at 1.2905.