clester
Market Veteran
- Reaction score
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Euro
There will be further doubts whether the ECB will be in a position to increase interest rates in September, especially if credit-related stresses intensify and these doubts will damage underlying Euro sentiment. There is also the threat of economic deterioration if property-sector concerns increase and the currency will also be unsettled if there are further banking losses. Overall fundamentals and confidence in the economy should, however, remain firm in relation to other major economies which will limit losses.
The Euro weakened sharply over the week with a sharp retreat against the dollar and heavy losses against the yen. The Euro weakened to lows near 150.0 against the Japanese currency.
There was little in the way of major economic data over the week, but the preliminary second-quarter GDP increase was held to 0.3% compared wi th expectations of 0.5% increase which maintained expectations of slower growth.
The Euro was unsettled by uncertainty surrounding the European financial-sector and fears that further sub-prime related losses would be revealed.
The ECB was forced to add huge amounts of liquidity to the market to keep markets functioning. The chances of a September ECB interest rate increase were cut to below 50% from near 100% two weeks ago
Yen
There will be reduced speculation over an August interest rate increase, but global financial trends are liable to remain dominant in the short-term. The increase in risk aversion will continue to strengthen the yen in the short-term with a shift away from high-yield currencies. Once carry trades have been scaled back substantially, there will be some scope for a rebound in high-y i eld currencies and a weaker yen, but volatility levels will remain very high.
The yen gained sharply during the week from a scaling back of carry trades as credit fears intensified. The Japanese currency pushed to highs around 112.0 against the dollar after the biggest one-day gain since 1998. The yen also gained rapidly against the Euro with a peak beyond 150.0.
The latest data did not suggest heavy capital repatriation, but there was still a net positive flow of capital into Japan.
There was some evidence that retail investors were scaling back overseas bond purchases and closing existing high-yield positions.
There were rumours that the Bank of Japan was checking prices to help stabilise markets, but no evidence of intervention.
The provisional second-quarter GDP increase was held to 0.1%. Markets lowered the probability of an August interest rate increase to around 20%.
Euro
There will be further doubts whether the ECB will be in a position to increase interest rates in September, especially if credit-related stresses intensify and these doubts will damage underlying Euro sentiment. There is also the threat of economic deterioration if property-sector concerns increase and the currency will also be unsettled if there are further banking losses. Overall fundamentals and confidence in the economy should, however, remain firm in relation to other major economies which will limit losses.
The Euro weakened sharply over the week with a sharp retreat against the dollar and heavy losses against the yen. The Euro weakened to lows near 150.0 against the Japanese currency.
There was little in the way of major economic data over the week, but the preliminary second-quarter GDP increase was held to 0.3% compared wi th expectations of 0.5% increase which maintained expectations of slower growth.
The Euro was unsettled by uncertainty surrounding the European financial-sector and fears that further sub-prime related losses would be revealed.
The ECB was forced to add huge amounts of liquidity to the market to keep markets functioning. The chances of a September ECB interest rate increase were cut to below 50% from near 100% two weeks ago
Yen
There will be reduced speculation over an August interest rate increase, but global financial trends are liable to remain dominant in the short-term. The increase in risk aversion will continue to strengthen the yen in the short-term with a shift away from high-yield currencies. Once carry trades have been scaled back substantially, there will be some scope for a rebound in high-y i eld currencies and a weaker yen, but volatility levels will remain very high.
The yen gained sharply during the week from a scaling back of carry trades as credit fears intensified. The Japanese currency pushed to highs around 112.0 against the dollar after the biggest one-day gain since 1998. The yen also gained rapidly against the Euro with a peak beyond 150.0.
The latest data did not suggest heavy capital repatriation, but there was still a net positive flow of capital into Japan.
There was some evidence that retail investors were scaling back overseas bond purchases and closing existing high-yield positions.
There were rumours that the Bank of Japan was checking prices to help stabilise markets, but no evidence of intervention.
The provisional second-quarter GDP increase was held to 0.1%. Markets lowered the probability of an August interest rate increase to around 20%.
