Forex Forecast

Bernanke Due Again Risk appetite improved from yesterday but FX markets traded in relatively tight ranges overnight, following yesterday’s big moves in the wake of Fed Chair Bernanke’s semi-annual testimony before Congress.

EUR USD (1.3355) The €530bn take-up by 800 European banks in the second tranche of the ECB’s LTRO was broadly in line with consensus expectations and the reaction was rather subdued.

ISDA To Rule On Greek CDS The dollar held onto most of its gains in the wake of Fed Chair Bernanke’s semi-annual testimony before Congress. He did not issue any revision to previous policy guidance but did acknowledge that the unemployment rate was falling faster than expected.

Bernanke Ruffles Feathers Surprisingly it was the Fed that spoiled the post-LTRO party during US hours as Fed Chairman’s Semi-Annual testimony before Congress suggested further stimulus might just be harder to come by.

EUR 530 bn LTRO The ECB announced it is lending banks EUR 530 bn in the much anticipated 3-year LTRO. This was slightly above consensus estimates and above the December offering both in terms of the gross number and the number of banks participating (800 this time around).

LTRO 2.0 Looms The euro advanced further during the Asia session ahead of today’s 3y LTRO. Our bank analysts and economists expect liquidity demand to reach EUR492 bn. Having fallen steadily in recent weeks, the consensus appears to sit in the same vicinity. There is less agreement about how the euro will react to any […]

Ireland To Hold Referendum The euro came under pressure in the US session after Irish Prime Minister Kenny announced that there will be a referendum on the EU fiscal compact. It’s hard to extract the longer term implications of this move at this stage and in reality, it largely depends on the question asked (just […]

Greece News Discounted Following S&P’s decision to lower Greek debt to ‘Selective Default’ rating last night, the ECB announced that it has temporarily suspended the Greek debt for use of collateral. This has been fairly well flagged and is a temporary part of the process – the ECB has previously agreed to continue to except […]

ISDA Deliberates On Greece S&P cut Greece’s sovereign rating to ‘selective default’ during the US session, but the FX reaction was minimal for several reasons. First, the move had been signalled months ago and the timing overnight came as no surprise.

Greece In ‘Selective Default’ Late during the US session S&P downgraded Greece to ‘selective default’, from CC. The agency noted that the CAC insertion has led to the debt plan to be a distressed debt restructuring, though the ratings should be revised back to CCC post-exchange.