Cyprus central bank chief calls for its independence to be respected

NICOSIA, April 14 | Sun Apr 14, 2013 4:58am EDT

NICOSIA, April 14 (Reuters) - Cyprus's central bank governor said on Sunday he was willing to work with the government to pull the island out of its economic crisis, provided the bank's independence was respected.

A rift between Governor Panicos Demetriades, appointed last May by the communist former administration, and the ruling centre-right government has deepened in recent days and pressure has grown on him to resign over his handling of the crisis.

In the past week, the Cypriot parliament started an investigation against Demetriades, President Nicos Anastasiades's government withdrew the appointment of his deputy, and three central bank officials resigned.

The ongoing saga drew a scathing response from European Central Bank (ECB) President Mario Draghi, who wrote to the Cypriot president telling him any attempt to effectively sack the governor could land Cyprus in the European Court of Justice.

"My intention to work with the country's democratic institutions is a given," Demetriades was quoted as saying in an interview with the Phileleftheros newspaper.

"We are ready to respond to every call for cooperation and coordination for the benefit of this country always, however within the framework of total respect towards the central bank's independence, as stipulated by the ECB."

Under European Union law, a governor can only be dismissed if he no longer fulfils the conditions required for the performance of his duties, or if he is guilty of serious misconduct.

The investigation launched by Cypriot lawmakers this week is seeking to find out whether Demetriades supplied enough information during an investigation into the demise of Cyprus's two biggest lenders, which left the economy in disarray.

The collapse of the Mediterranean island's banking system imposed massive losses on depositors in order to qualify for a 10 billion euro ($13 billion) bailout by the European Union and International Monetary Fund.

The departures in the past week from the regulator's board have slimmed the six-member board to two, including Demetriades. However, executive power rests with the governor so while they add to the pressure on Demetriades to quit, they are not expected to affect policy-making.

The government, in power for under two months, has sought to play down accusations it was intervening with the central bank's duties.

Government spokesman Christos Stylianides said authorities demanded Demetriades take back comments he made on the sidelines of a Eurogroup meeting in Dublin this week that the central bank's independence was under attack.

View the original article here

Cyprus central bank chief calls for its independence to be respected

NICOSIA, April 14 | Sun Apr 14, 2013 4:58am EDT

NICOSIA, April 14 (Reuters) - Cyprus's central bank governor said on Sunday he was willing to work with the government to pull the island out of its economic crisis, provided the bank's independence was respected.

A rift between Governor Panicos Demetriades, appointed last May by the communist former administration, and the ruling centre-right government has deepened in recent days and pressure has grown on him to resign over his handling of the crisis.

In the past week, the Cypriot parliament started an investigation against Demetriades, President Nicos Anastasiades's government withdrew the appointment of his deputy, and three central bank officials resigned.

The ongoing saga drew a scathing response from European Central Bank (ECB) President Mario Draghi, who wrote to the Cypriot president telling him any attempt to effectively sack the governor could land Cyprus in the European Court of Justice.

"My intention to work with the country's democratic institutions is a given," Demetriades was quoted as saying in an interview with the Phileleftheros newspaper.

"We are ready to respond to every call for cooperation and coordination for the benefit of this country always, however within the framework of total respect towards the central bank's independence, as stipulated by the ECB."

Under European Union law, a governor can only be dismissed if he no longer fulfils the conditions required for the performance of his duties, or if he is guilty of serious misconduct.

The investigation launched by Cypriot lawmakers this week is seeking to find out whether Demetriades supplied enough information during an investigation into the demise of Cyprus's two biggest lenders, which left the economy in disarray.

The collapse of the Mediterranean island's banking system imposed massive losses on depositors in order to qualify for a 10 billion euro ($13 billion) bailout by the European Union and International Monetary Fund.

The departures in the past week from the regulator's board have slimmed the six-member board to two, including Demetriades. However, executive power rests with the governor so while they add to the pressure on Demetriades to quit, they are not expected to affect policy-making.

The government, in power for under two months, has sought to play down accusations it was intervening with the central bank's duties.

Government spokesman Christos Stylianides said authorities demanded Demetriades take back comments he made on the sidelines of a Eurogroup meeting in Dublin this week that the central bank's independence was under attack.

View the original article here

Long Lines as Banks Reopen in Cyprus After Freeze

“We were in the Stone Age, and now we’re entering the 19th century,” he said in this village near the capital, Nicosia, after visiting his branch of the Bank of Cyprus, which opened Thursday for the first time since March 15. He cursed the strict new controls that for at least the next week will give him access to only a tiny portion of his money and stop him from cashing checks freely or using his bank to pay suppliers who use different ones.

Across Cyprus, fears that the reopening could lead to a bank run gave way Thursday to conflicting emotions: relief that bank doors were at least open again, but anger over the new rules, which allow deposits but tightly ration withdrawals.

The restrictions are meant to keep customers from draining their accounts in the wake of the bailout deal announced Monday morning in Brussels. European leaders hailed the deal as saving Cyprus’s teetering banks — and the country as a whole — from collapse.

But the prevailing view in Cyprus is that those leaders have mainly sought to halt a potential financial contagion from spreading by allowing it to devastate Cyprus and its bank depositors.

For Mr. Sofroniou, the bailout terms show that the European Union is driven by the same merciless forces now playing out in the long concrete-and-aluminum sheds of his family farm. “The weakest pigs in the pen don’t eat,” he said. “The strong ones eat everything. This is the law of nature.”

In a daily struggle for meager rations, he said, “The weak ones will be eaten.”

Mr. Sofroniou has a sheaf of checks from customers who have bought pigs from him over the past two weeks. But they were nearly all drawn on accounts at cooperative banks and are not yet honored by the Bank of Cyprus.

Not since the introduction of the euro in January 1999 has a European country blocked bank depositors from having full access to their own cash. Under European Union treaties, such restrictions are normally forbidden. But the European Commission, the union’s administrative arm, issued a statement Thursday morning that the Cyprus controls were legal — though urging that they be rescinded as soon as possible. Originally, the controls were to be in place for one week. But on Thursday, the Cypriot foreign minister, Ioannis Kasoulides, said that restrictions on financial transactions would not be lifted for a month.

Earlier, as banks were preparing to open at noon, local radio stations and Twitter messages pleaded for patience, urging people to show patriotic discipline and not to stampede cashier windows. To make sure that there was enough cash on hand, the European Central Bank flew in a container on Wednesday with about 1.5 billion euros, or $1.9 billion, to the Larnaca airport near Nicosia. The container was then taken under police escort to the Cypriot central bank.

Bank employees started preparing early. Many were given three pages of allowed transactions to which to refer when customers demanded their money. Bags of coins were piled high on a desk at Laiki Bank in central Nicosia, while a manager in a dark business suit stood at the front door waving away a retiree who was trying to enter early.

Some of those in bank lines on Thursday conceded understanding for the rigid restrictions, imposed by Cypriot officials in consultation with the European Central Bank, the European Commission and the International Monetary Fund — the so-called troika of lenders that now largely dictates the fate of Cyprus. The lenders promised the country 10 billion euros, or $12.8 billion, as long as it shrinks a banking sector bloated by money from wealthy Russians and other foreigners seeking to avoid taxes back home.

“They need to control the money,” said Dimitris Dimitriou, the owner of an optical business. He stood in line for 45 minutes in Nicosia to enter a branch of Laiki Bank, which is set to be dismantled as part of the bailout. “Financially it’s been a disaster, for me and for the entire population.”

As security guards let a slow trickle of customers through a revolving door, a small crowd pressed Mr. Dimitriou toward the bank’s entrance, a scene probably repeated in hundreds of spots across the country. But with the police on high alert and extra private security guards called in to prevent disorder, no outbreaks of violence were reported.

Few thought that the banks’ reopening was a return to normality — or even a dependable sign that a bank run was out of the question once the currency controls lift. “People here have not recovered from the shock that has happened to us,” Mr. Dimitriou said. When they do, he said, “a lot more people will want to get their money out of the banks.”

The controls effectively create two classes of the same money, analysts said: the constrained euros in Cyprus, and the fully fungible ones elsewhere.

In Akaki, the village president, Giannakis Chatziyannis, said he feared that “this is just the start of our troubles.” The economic crisis, he said, will get far worse as jobs evaporate — including those at a local Laiki branch set to be shut down. He was supposed to pay his own employees at the end of March but told them they would have to wait.

“Everyone knows that the next 10 years are going to be very bleak,” he said. “We are in a downward spiral.”

Anger at the European Union and its most powerful member, Germany, has reached a boiling point in Cyprus. Even in Akaki, which seems distant from the political passions of the capital, Chancellor Angela Merkel of Germany has become a hated figure. Writing by the roadside entrance to the village referred to her with a vulgarism and said, “Cyprus above all.”

“We are what you call collateral damage,” said Chrysanthos Chrysanthou, a goat and chicken farmer. He blamed the German-led push to reshape Cyprus’s banking industry for leaving his animals on “starvation rations.”

He, too, went to the bank on Thursday and withdrew the limit of 300 euros, far less than he needed to keep his animals fed.

Germany and other lenders “say they want to penalize bankers but are just hurting everyone,” he said. “We are not all bankers. A lot of people here do real work.”

When a supplier of animal feed called to demand cash, he said he could pay only by check. The supplier, who uses a different bank, said no. Throwing down the phone in fury, Mr. Chrysanthou said he had returned to Cyprus in 1994 after years in South Africa but was now thinking of leaving. “I left South Africa after I was robbed by thieves,” he said. “Now I’m being robbed again here.”

Andrew Higgins reported from Akaki, and Liz Alderman from Nicosia, Cyprus. Dimitrias Bounias contributed reporting from Akaki, and Andreas Ris from Nicosia.

This article has been revised to reflect the following correction:

Correction: March 28, 2013

An earlier version of this article referred incorrectly to capital controls in Europe. They have not been applied since the introduction of the euro; it is not the case that they have never been applied.

This article has been revised to reflect the following correction:

Correction: March 28, 2013

An earlier version of this article misstated the surname of the president of the village of Akaki. He is Giannakis Chatziyannis, not Chatzyiannis.

View the original article here

Cyprus Court Jails Hezbollah Man for Plotting to Attack Israelis

In a case bearing similarities to a deadly bus bombing in Bulgaria targeting Israelis last year, the Cypriot court convicted Hossam Taleb Yaccoub on five counts of participating in a criminal organization and agreeing to commit a crime.

Yaccoub, 24 when he was arrested, was accused of tracking movements of Israeli tourists at Larnaca airport, and routes of buses transporting them.

He was detained in Cyprus two weeks before a suicide bomber killed five Israeli tourists in the Bulgarian resort of Burgas in July, an attack Sofia blamed on Hezbollah. The group denies involvement.

Yaccoub, a Swedish national of Lebanese origin, pleaded not guilty. He admitted he was a member of Hezbollah, saying he would carry out innocent errands for a handler code-named Ayman, whom he could not fully identify because he always wore a hood.

"There is no doubt these are serious crimes which could have potentially endangered Israeli citizens and targets in the Republic," the three-bench court said during sentencing.

Yaccoub's jail term will run concurrently with his period in custody since July.

The United States, which, like Israel, considers Hezbollah a terrorist organization, has said the guilty verdict on Yaccoub announced by the Cypriot court on March 21 highlighted the need for the European Union to crack down on the Lebanese group.

The EU, to which Cyprus belongs, has resisted pressure from the United States and Israel to blacklist Hezbollah, saying that doing so might destabilize Lebanon and add to regional tensions.

(Writing by Michele Kambas; Editing by Alistair Lyon)

View the original article here

Cyprus Court Jails Hezbollah Man for Plotting to Attack Israelis

In a case bearing similarities to a deadly bus bombing in Bulgaria targeting Israelis last year, the Cypriot court convicted Hossam Taleb Yaccoub on five counts of participating in a criminal organization and agreeing to commit a crime.

Yaccoub, 24 when he was arrested, was accused of tracking movements of Israeli tourists at Larnaca airport, and routes of buses transporting them.

He was detained in Cyprus two weeks before a suicide bomber killed five Israeli tourists in the Bulgarian resort of Burgas in July, an attack Sofia blamed on Hezbollah. The group denies involvement.

Yaccoub, a Swedish national of Lebanese origin, pleaded not guilty. He admitted he was a member of Hezbollah, saying he would carry out innocent errands for a handler code-named Ayman, whom he could not fully identify because he always wore a hood.

"There is no doubt these are serious crimes which could have potentially endangered Israeli citizens and targets in the Republic," the three-bench court said during sentencing.

Yaccoub's jail term will run concurrently with his period in custody since July.

The United States, which, like Israel, considers Hezbollah a terrorist organization, has said the guilty verdict on Yaccoub announced by the Cypriot court on March 21 highlighted the need for the European Union to crack down on the Lebanese group.

The EU, to which Cyprus belongs, has resisted pressure from the United States and Israel to blacklist Hezbollah, saying that doing so might destabilize Lebanon and add to regional tensions.

(Writing by Michele Kambas; Editing by Alistair Lyon)

View the original article here

Long Lines as Banks Reopen in Cyprus After Freeze

“We were in the Stone Age, and now we’re entering the 19th century,” he said in this village near the capital, Nicosia, after visiting his branch of the Bank of Cyprus, which opened Thursday for the first time since March 15. He cursed the strict new controls that for at least the next week will give him access to only a tiny portion of his money and stop him from cashing checks freely or using his bank to pay suppliers who use different ones.

Across Cyprus, fears that the reopening could lead to a bank run gave way Thursday to conflicting emotions: relief that bank doors were at least open again, but anger over the new rules, which allow deposits but tightly ration withdrawals.

The restrictions are meant to keep customers from draining their accounts in the wake of the bailout deal announced Monday morning in Brussels. European leaders hailed the deal as saving Cyprus’s teetering banks — and the country as a whole — from collapse.

But the prevailing view in Cyprus is that those leaders have mainly sought to halt a potential financial contagion from spreading by allowing it to devastate Cyprus and its bank depositors.

For Mr. Sofroniou, the bailout terms show that the European Union is driven by the same merciless forces now playing out in the long concrete-and-aluminum sheds of his family farm. “The weakest pigs in the pen don’t eat,” he said. “The strong ones eat everything. This is the law of nature.”

In a daily struggle for meager rations, he said, “The weak ones will be eaten.”

Mr. Sofroniou has a sheaf of checks from customers who have bought pigs from him over the past two weeks. But they were nearly all drawn on accounts at cooperative banks and are not yet honored by the Bank of Cyprus.

Not since the introduction of the euro in January 1999 has a European country blocked bank depositors from having full access to their own cash. Under European Union treaties, such restrictions are normally forbidden. But the European Commission, the union’s administrative arm, issued a statement Thursday morning that the Cyprus controls were legal — though urging that they be rescinded as soon as possible. Originally, the controls were to be in place for one week. But on Thursday, the Cypriot foreign minister, Ioannis Kasoulides, said that restrictions on financial transactions would not be lifted for a month.

Earlier, as banks were preparing to open at noon, local radio stations and Twitter messages pleaded for patience, urging people to show patriotic discipline and not to stampede cashier windows. To make sure that there was enough cash on hand, the European Central Bank flew in a container on Wednesday with about 1.5 billion euros, or $1.9 billion, to the Larnaca airport near Nicosia. The container was then taken under police escort to the Cypriot central bank.

Bank employees started preparing early. Many were given three pages of allowed transactions to which to refer when customers demanded their money. Bags of coins were piled high on a desk at Laiki Bank in central Nicosia, while a manager in a dark business suit stood at the front door waving away a retiree who was trying to enter early.

Some of those in bank lines on Thursday conceded understanding for the rigid restrictions, imposed by Cypriot officials in consultation with the European Central Bank, the European Commission and the International Monetary Fund — the so-called troika of lenders that now largely dictates the fate of Cyprus. The lenders promised the country 10 billion euros, or $12.8 billion, as long as it shrinks a banking sector bloated by money from wealthy Russians and other foreigners seeking to avoid taxes back home.

“They need to control the money,” said Dimitris Dimitriou, the owner of an optical business. He stood in line for 45 minutes in Nicosia to enter a branch of Laiki Bank, which is set to be dismantled as part of the bailout. “Financially it’s been a disaster, for me and for the entire population.”

As security guards let a slow trickle of customers through a revolving door, a small crowd pressed Mr. Dimitriou toward the bank’s entrance, a scene probably repeated in hundreds of spots across the country. But with the police on high alert and extra private security guards called in to prevent disorder, no outbreaks of violence were reported.

Few thought that the banks’ reopening was a return to normality — or even a dependable sign that a bank run was out of the question once the currency controls lift. “People here have not recovered from the shock that has happened to us,” Mr. Dimitriou said. When they do, he said, “a lot more people will want to get their money out of the banks.”

The controls effectively create two classes of the same money, analysts said: the constrained euros in Cyprus, and the fully fungible ones elsewhere.

In Akaki, the village president, Giannakis Chatziyannis, said he feared that “this is just the start of our troubles.” The economic crisis, he said, will get far worse as jobs evaporate — including those at a local Laiki branch set to be shut down. He was supposed to pay his own employees at the end of March but told them they would have to wait.

“Everyone knows that the next 10 years are going to be very bleak,” he said. “We are in a downward spiral.”

Anger at the European Union and its most powerful member, Germany, has reached a boiling point in Cyprus. Even in Akaki, which seems distant from the political passions of the capital, Chancellor Angela Merkel of Germany has become a hated figure. Writing by the roadside entrance to the village referred to her with a vulgarism and said, “Cyprus above all.”

“We are what you call collateral damage,” said Chrysanthos Chrysanthou, a goat and chicken farmer. He blamed the German-led push to reshape Cyprus’s banking industry for leaving his animals on “starvation rations.”

He, too, went to the bank on Thursday and withdrew the limit of 300 euros, far less than he needed to keep his animals fed.

Germany and other lenders “say they want to penalize bankers but are just hurting everyone,” he said. “We are not all bankers. A lot of people here do real work.”

When a supplier of animal feed called to demand cash, he said he could pay only by check. The supplier, who uses a different bank, said no. Throwing down the phone in fury, Mr. Chrysanthou said he had returned to Cyprus in 1994 after years in South Africa but was now thinking of leaving. “I left South Africa after I was robbed by thieves,” he said. “Now I’m being robbed again here.”

Andrew Higgins reported from Akaki, and Liz Alderman from Nicosia, Cyprus. Dimitrias Bounias contributed reporting from Akaki, and Andreas Ris from Nicosia.

This article has been revised to reflect the following correction:

Correction: March 28, 2013

An earlier version of this article referred incorrectly to capital controls in Europe. They have not been applied since the introduction of the euro; it is not the case that they have never been applied.

This article has been revised to reflect the following correction:

Correction: March 28, 2013

An earlier version of this article misstated the surname of the president of the village of Akaki. He is Giannakis Chatziyannis, not Chatzyiannis.

View the original article here

What if We’re Wrong About Cyprus and Jeroen Dijsselbloem?

By Christopher Vecchio, Currency Analyst 26 March 2013 22:00 GMT Let me preface this by first saying that by no means would I consider myself a Euro apologist. I think the Euro crisis has been poorly handled from the start, and that the latest period of calm is nothing short of a farce, only thanks to the European Central Bank’s efforts to do “whatever it takes” to save the Euro, back in July 2012. But an end might be in sight for the Euro-zone sovereign debt crisis – and it’s not an exit that anyone has been looking towards.

The past few days have been mired by endless speculation over the precedent the bailout of Cyprus might set for other peripheral countries. After all, the Euro project is about equality and unity; and given the progression of the crisis, we know that each step has set the precedence for the next step. That is to say, the Cypriot bailout – one which looped in depositors to take the fall for banks’ poor investing (gambling) decisions – is now considered a “template” for the rest of Europe. By now, everyone has recycled the fact first brought to light by The Economist in this week’s issue: of the 147 financial crises since 1970, none of them resulted in depositors taking losses before Cyprus, according to the IMF. This is a unique case indeed.

But is it really a unique case? Eurogroup President Jeroen Dijsselbloem seems to disagree. In a revealing joint-interview with the Financial Times/Reuters yesterday, Mr. Dijsselbloem said that:

“We should start pushing back the risks. If there is a risk in a bank, our first question should be: “Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?” If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: “What can you do in order to save your own banks?”

So then Cyprus is not a unique case, it is the “blueprint” (another one of Mr. Dijsselbloem’s carefully chosen words) for future bailouts. The Euro has been hit quite hard as a result of this comment, falling from just under $1.3000 against the US Dollar into the mid-$1.2800s in a few hours on March 25. Everyone, including myself, was focusing on the latter half of the quote: those uninsured deposit holders would join their constituents as candidates to recapitalize a downtrodden bank.

I posited this morning that “The big question now: if you have over €100,000 in a country whose banking system is on life support, do you feel that your money is safe?” This was a direct reference to Italy and Spain, the two countries closest to the core affected by the debt crisis. Mainly, I would be terrified if my savings were past the €100,000 threshold – news broke today that a Swedish EU member of parliament was setting forth legislation that would put uninsured deposit holders (over the said €100,000 threshold) on the chopping block ahead of tax payers for bailout proceedings. This is a big deal in the short-term, but maybe not in the long-term.

On second glance, the main point that everyone should be taking away from Mr. Dijsselbloem’s comments is the first part of the sentence, when he said “We should start pushing back the risks.” We need to go to the root of the crisis to understand where the risks are stemming from: the strong interrelationship between banks and their sovereigns. Banks buy sovereign debt, sovereigns invest in the banks – it’s an endless loop where each party has their hand in the other’s pocket as well.

To truly end the European sovereign debt crisis, this strong interrelationship needs to be severed. A potential tax on uninsured deposit holdings is just the way to end it.

Before Cyprus, when a bank needed bailouts, they would go to their sovereign for funds. The sovereign would recapitalize the bank, and in return, the sovereign would get an investment in the bank. With the European economy in the gutter, quite frankly, many banks’ losses keep piling up, putting further strain on the sovereigns, while the banks don’t see a true penalty; moral hazard. The public debt racks up, government revenues can’t keep up the pace to pay off their own debt, and voila: the sovereign needs a bailout as well.

We’ve all been led to believe that the European Stability Mechanism (ESM) would be the facility by which these sovereigns would receive emergency funding. But the ESM is derived from tax payer money, which in effect would mean that the connection between sovereigns and banks remains. Mr. Dijsselbloem said that “We should aim at a situation where we will never need to even consider direct recap.”Now, like in Cyprus, it’s clear that tax payers won’t contribute to bailouts going forward.

Essentially, Mr. Dijsselbloem has placed deposit holders in front of the tax payers for bailouts. Risk is now diverted away from the sovereign – the severing begins. But why is levying a deposit tax, if you will, the right move?

In short, depositors are the life blood of a bank. Without depositors, the bank collapses. If a bank in a peripheral country is taking on extra risk to generate windfall profits – a quick and haphazard way of trying to cover holes in the balance sheet – it will be forced to curb its risk taking in order to shore up Tier 1 capital ratios, thereby preventing panic among its depositors. In the instance of a crisis on the sovereign level, banks with higher capital ratios could withstand the impact of sovereign debt writedowns, and the ‘Greek sovereign-Cyprus financial’ loop won’t happen again in the Euro-zone.

Of course, to get to the end of the crisis now looks like a messy road – selling of assets to raise capital, which would likely put upward pressure on peripheral bond yields. The pace of raising capital could be quick, now that Mr. Dijsselbloem has seemingly fumbled his words, with many calling him ‘inept’ in his wake. Luckily, the ECB has its OMT safety net in place – the facility that has quite literally saved Italy and Spain – and with its key rate at 0.75%, it could easily slash 50-bps to cushion the economy amid balance sheet contractions.

There may be some words lost in translation, but Mr. Dijsselbloem is no idiot – he’s the President of the Eurogroup. I still believe that this crisis is going to get a lot worse – but I’m also considering the notion that Mr. Dijsselbloem may have unlocked the door to truly “pushing back the risks,” by changing the pace and direction of the Euro-zone crisis. Now that banks have skin in the game, the game is about to change.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

26 March 2013 22:00 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: Weekly Spotlight'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Euro Unimpressed by Cyprus Deal as Capital Flight Fears Linger

The Euro has shed earlier gains and now trades little changed after Cyprus and the EU agreed to a bailout deal as capital flight fears continue to linger.

Talking Points

Euro Yields Tepid Response to Cyprus Bailout Deal as Capital Flight Fears Japanese Yen Declined as Stocks Rose in Asia, Denting Safe-Haven Demand The major currencies are little changed in overnight trade. The Japanese Yen is broadly underperforming as Asian stocks advance, sapping demand for the regional haven currency. The MSCI Asia Pacific benchmark equity index has added 0.9 percent after Cyprus and the so-called “troika” (EU/ECB/IMF) agreed to measures paving the way for launch of the country’s bailout program. The Euro spiked higher as the news of the deal emerged but the single currency has since retreated as worries about the impact of the Cyprus fiasco on depositor confidence elsewhere in single currency bloc continue to swirl.

The package of measures emerging out of the weekend’s negotiations focuses most specifically on Laiki Bank, Cyprus’ second-largest lender. The bank will be split, with unsecured deposits (all those over €100,000) transferred to a so-called “bad bank” and eventually wound up. Losses to unsecured depositors from this move are being estimated at 30-40 percent. Secured deposits and performing assets will be moved to Bank of Cyprus. This process is expected to raise €4.2 billion. The Cypriot government will further use privatization and taxation to generate additional funding to move toward unlocking €10 billion in EU aid, a process expected to conclude by mid-April.

On balance, investors’ lack of enthusiasm for the bailout seems reasonable. The critical issue remains that of precedent for larger Eurozone countries, and the way in which the Cyprus situation has been managed does not seem to inspire a great deal of confidence. Depositors in countries with similarly sickly banking sectors (notably Spain) are unlikely to be greatly encouraged by the prospect of losing close to a third of their deposits over €100k with the EU’s blessing if trouble were to arise. Cyprus’ introduction of capital controls to prevent a bank run when lending institutions reopen for business, again with approval from Brussels, is unlikely to sit well also.

This raises the most important question of all: why should a depositor in Spain or a country similarly vulnerable to a banking crisis expect to be left unscathed if a Cyprus-like calamity were to befall them. If such an expectation is deemed unreasonable in light of today’s events, the depositor in question may well opt not to keep money in the Eurozone altogether, and he/she may not be alone. This leaves the markets waiting to see if a mass exodus of capital does indeed occur as the region digests the latest news-flow, for then the worst-case scenario will be upon the Eurozone whether or not Cyprus receives its aid.

Asia Session:

Hometrack Housing Survey (MoM) (MAR)

Hometrack Housing Survey (YoY) (MAR)

Euro Session:

Italian Consumer Confidence Index (MAR)

BBA Loans for House Purchase (FEB)

Italy to Sell 2014 Bonds, 2018-23 I/L Bonds

Critical Levels:

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

View the original article here

Euro Eyes Cyprus Banks Open, Krona May Rise on German Data

By Ilya Spivak, Currency Strategist 28 March 2013 06:53 GMT The Euro looks toward the reopening of banks in Cyprus for direction cues while the Swedish Krona may rise if German jobs data tops expectations.

Talking Points

Swedish Krona May Rise if German Jobs Report Tops Expectations Euro Looks to Reopening of Cyprus Banks for Directional Guidance Yen Rose as Aussie Dollar Underperformed on Risk Aversion in Asia German Unemployment figures headline the economic calendar in European hours. Expectations call for the economy to add 2,000 jobs in March, keeping the unemployment rate unchanged at 6.9 percent for a sixth consecutive month. The March set of German PMI figures showed resilience in hiring despite weakness in overall private-sector activity. Indeed, Markit reported the strongest improvement in employment since January 2012, saying companies it polled cited “efforts to increase capacity and long-turn expansion plans.” Currencies geared to German growth – notably the Swedish Krona – may find support if that proves to foreshadow a better-than-expected outcome on today’s report.

As for the Euro itself, the focus remains on lingering uncertainty in Cyprus and political instability in Italy. Greek newspaper Kathimerini reported that Cypriot banks will finally reopen today and traders will be closely watching to gauge the effectiveness of capital controls installed to prevent a mass exodus of capital. Restrictions include a €300/day withdrawal limit and a ban on cashing checks. Taking more than €1000 in cash across the border is likewise now prohibited. A relatively orderly reopening may boost the single currency, social unrest or reports of banks flouting the new rules stand to yield the opposite result. Meanwhile in Italy, Democratic Party Leader Pier Luigi Bersani is expected to report that he was not able to forge a coalition today, clearing the way for President Napolitano to tap another politician to attempt to form a government.

Risk aversion gripped currency markets in overnight trade. The Japanese Yen outperformed, adding as much as 0.5 percent on average against its top counterparts as Asian stocks declined, boosting safe-haven demand and encouraging an unwinding of carry trades funded cheaply in the low-yielding currency. The Australian Dollar bore the brunt of risk-off flows in the FX space, sliding as much as 0.5 percent on average against the majors.

Asia Session:

TD Securities Inflation (MoM) (MAR)

TD Securities Inflation (YoY) (MAR)

GfK Consumer Confidence Survey (MAR)

Private Sector Credit (MoM) (FEB)

Private Sector Credit (YoY) (FEB)

BOJ Governor Kuroda Speaks at Parliament

Industrial Profits YTD (YoY) (FEB)

Euro Session:

Nationwide House Prices s.a. (MoM) (MAR)

Nationwide House Prices n.s.a. (YoY) (MAR)

German Retail Sales (MoM) (FEB)

German Retail Sales (YoY) (FEB)

German Unemployment Change (MAR)

German Unemployment Rate s.a. (MAR)

Index of Services (3Mo3M) (JAN)

Critical Levels:

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

28 March 2013 06:53 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: Euro Open'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Data from Canada, US in Focus as European Sentiment Centers Around Cyprus

Cyprus is not a “tempest in a teapot,” as one might call it. Euro-zone leaders have been criticized for their handling of the Cypriot crisis, from the radical measure of a deposit levy set forth by core leadership, to the dismissal of pan-European discussions by the Cypriot government herself. The critiques are valid.

The decision to tax savers is important because of how the European sovereign debt crisis has flowed: each policy undertaken has set precedence for the next bailout; if Cypriot savers had to contribute to the bailout of its banks, then why wouldn’t the same measures be forced upon Italian and Spanish savers? The Troika will be forced to give the same terms at minimum in order to prevent alienating Cyprus – the Euro is about unity, anything short would paint Cyprus as a second-class citizen.

Away from the boiling Cypriot crisis, Europe is rather quite on the data front this week, so the focus is on Canada and the United States, where there are several significant pieces of data due out. The critical data will be released between Tuesday and Thursday, as the Easter holiday weekend has US markets closed on Friday, and European markets closed on Friday and Monday.

Rate Hike Probabilities / Basis-Points Expectations

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

03/26 Tuesday // 12:30 GMT: USD Durable Goods Orders (FEB)

Durable Goods Orders are the big ticket, long-lasting (lifespans of three years or more) items that consumers vie for – automobiles, home appliances, etc. Accordingly, the report is an important indicator about the health of the US consumer: the report indicates strength when disposable income has increased in the prior periods; and the report is weak when near-term economic uncertainty is prevalent. While the January reading was quite dour, this was due to the hike in the payroll tax resulting from the fiscal cliff/slope deal; a rebound in February is expected. Given other indexes of consumer consumption is improving, I am expected a strong print that should lead to US Dollar strength.

CONSENSUS: +3.9% m/m

PRIOR: -4.9% m/m (revised from -5.2% m/m)

The key pairs to watch are EURUSD and USDJPY.

03/26 Tuesday // 14:00 GMT: USD Consumer Confidence (MAR)

Consumer confidence in the United States is a key indicator, as there is a strong relationship between spending and sentiment: the more confident consumers are about their economic futures, the more likely that they are to step up spending. Considering that consumption accounts for approximately 72% of the headline GDP figure, any significant moves in the Conference Board’s Consumer Confidence index are likely to stoke speculation about the health of the US economy. Recent private sentiment readings have slipped, suggesting that the budget sequestration has had a negative impact. I believe the disappointment over the budget sequestration will be exhibited here, leading to potential short-term US Dollar weakness.

CONSENSUS: 67.5

PRIOR: 69.6

The key pairs to watch are EURUSD and USDJPY.

03/27 Wednesday // 12:30 GMT: CAD Consumer Price Index (FEB)

The Bank of Canada has recently called a rate hike “less imminent,” (February policy statement) citing the “muted outlook for inflation” (March policy statement). Accordingly, “the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target” (March policy statement). It’s evident that BoC policymakers are focused in on price pressures, raising the specter of the Canadian Consumer Price Index to the most important data impacting the Canadian Dollar. In line with consensus, I am expecting a small beat here that could uplift the Loonie.

CONSENSUS: +0.7% m/m; +0.8% y/y

PRIOR: +0.1% m/m; +0.5% y/y

The key pairs to watch are CADJPY and USDCAD.

03/28 Thursday // 12:30 GMT: CAD Gross Domestic Product (JAN)

The Canadian economy has hit a small rough patch, experiencing meager growth of under one percent on a yearly-basis, despite substantially accommodative monetary policy remaining in place. Alongside the recent bout of soft inflation figures (3Q’12 to present), the moderation in growth is a main culprit in the BoC’s shift keeping accommodative stimulus in place for “a period of time.” The good news is that growth purportedly returned, after a small contraction in January. The print should fall in line with improved Canadian data from the previous day.

CONSENSUS: +0.1% m/m; +0.9% y/y

PRIOR: -0.2% m/m; +0.8% m/m

The key pairs to watch are EURCAD and USDCAD.

03/28 Thursday // 12:30 GMT: USD Gross Domestic Product (4Q T)

US defense spending plummeted by -22% annualized in the 4Q’12, leading to an initial -0.1% reading for GDP of the world’s largest economy. But strong positive revisions to consumption figures have pushed the secondary reading up to +0.1% annualized, and now, there is scope for an even bigger improvement at the third and final adjustment. With the US budget sequestration hitting in March 2013, a strong final revision to the 4Q’12 GDP figure could go a long way towards easing discouraged sentiment over the fiscal drag.

CONSENSUS: +0.5% annualized

PRIOR: +0.1% annualized (from -0.1% annualized)

The key pairs to watch are EURUSD and USDJPY.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

View the original article here

Euro Relief Rally Falters, Cyprus Faces Negative Consequences

By David Song, Currency Analyst 25 March 2013 13:20 GMT Talking Points

Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’ British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’

The Euro climbed to an overnight high of 1.3047 as Cyprus agreed to shrink its banking sector in order to obtain EUR 10.0B in emergency funding, but the lingering threat of a bank-run may present another near-term shock for the single currency as the governments operating under the monetary union struggle to get their house in order.

As Cyprus still needs to raise the EUR 5.8B required to secure the EUR 10.0B bailout, further development surrounding the rescue package may prop up the Euro over the next 24-hours of trading, and the relief rally may spark another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as European policy makers increase their effort to avert a euro-area exit.

However, Moody’s Investor Services warned that the banking crisis in Cyprus ‘will have profound long-term negative consequences for the sovereign’ and went onto say that the region ‘will remain at risk of default and exit from the euro area for a prolonged period’ as the periphery country remains mired in a recession.

As the ongoing turmoil in the financial system diminishes the longer-term outlook for the euro-area, the weakening outlook for growth and inflation may continue to dampen the appeal of the single currency, and we may see the periphery countries become increasingly reliant on external support as European policy makers maintain a reactionary approach in addressing the risks surrounding the region.

In turn, the European Central Bank (ECB) may have little choice but to further embark on its easing cycle throughout 2013, and the EURUSD may struggle to maintain the rebound from 1.2842 as the central bank remains poised to push the benchmark interest rate to a fresh record-low.

British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance

The British Pound failed to maintain the advance from the previous week, with the GBPUSD falling back below the 1.5200 figure, and the sterling may continue to consolidate in the coming days as the pair appears to be carving a near-term top just ahead of former support- the 50.0% Fib from the 2009 low to high around 1.5260.

Indeed, the British Pound struggled to hold its ground as a report by the British Bankers’ Association showed loans for home purchases increased 30,506 in February amid forecasts for a 33,500 print, and the sterling may struggle to maintain the rebound from the yearly low (1.4830) should the economic docket continue to a risk for a triple-dip recession in the U.K.

In turn, we may see the GBPUSD work its way back towards the 61.8% retracement around 1.4840-50, and the pair may face range-bound prices ahead of the next Bank of England (BoE) interest rate decision on April 4 as market participants weigh the outlook for monetary policy.

U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap

The greenback firmed up on Monday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from a low of 10,413, and the reserve currency may continue to gain ground during the North American trade as manufacturing activity in the world’s largest economy is expected to pick up in March.

Indeed, the Dallas Fed Manufacturing index is expected to increase to 3.7 from 2.2 in February, and we may see a growing number of Fed officials adopt a more upbeat tone for the world’s largest economy as the recovery gradually gathers pace. In turn, we may see New York Fed President William Dudley adopt an improved outlook for growth and inflation, and the FOMC may start to discuss a tentative exit strategy over the coming months as the region gets on a more sustainable path.

FX Upcoming

Dallas Fed Manufacturing Activity (MAR)

Fed's William Dudley to Speak on U.S. Economy

Fed's Bernanke, BoE's King, IMF's Blanchard Speak on Crisis

Trade Balance (New Zealand dollars) (FEB)

Balance (YTD) (New Zealand dollars) (FEB)

Exports (New Zealand dollars) (FEB)

Imports (New Zealand dollars) (FEB)

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

RelatedArticles: Weekly Currency Trading Forecast

New to FX? Watch this Video

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

25 March 2013 13:20 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: US Open'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Crude Oil to Rise as Gold Falls on Orderly Cyprus Banks Reopen

Crude oil is likely to rise amid a recovery in risk appetite while gold prices fall if Cyprus manages an orderly reopening of the troubled nation’s banks.

Talking Points

Crude Oil, Copper Look to Reopening of Cyprus Banks to Guide Risk Trends Gold Prices to Decline as Silver Moves Higher on Recovery in Risk Sentiment Commodity prices are treading water in late Asian trade as markets continue to cast a worried eye toward the Eurozone. Needless to say, lingering uncertainty in Cyprus and political instability in Italy remain in focus. Greek newspaper Kathimerini reported that Cypriot banks will finally reopen today and traders will be closely watching to gauge the effectiveness of capital controls installed to prevent a mass exodus of capital.

A relatively orderly reopening may boost risk appetite, sending cycle-sensitive crude oil and copper prices higher. The XAU/XAG ratio is showing an increasingly significant inverse correlation with our in-house risk appetite gauge, hinting such an outcome stands to weigh on gold while boosting silver. Signs of social unrest or reports of banks flouting the new rules stand to yield the opposite results.

Meanwhile in Italy, Democratic Party Leader Pier Luigi Bersani is expected to report that he was not able to forge a coalition today, clearing the way for President Napolitano to tap a neutral politician to attempt to form a government that brings together the various Italian political factions. Investors will be keen to learn who this may be and gauge whether he/she has the wherewithal to succeed in producing a pro-reform administration.

S&P 500 index futures are pointing lower, warning that the path of least resistance for risk appetite favors the downside. On the economic data front, the spotlight is on the final revision of fourth-quarter US GDP figures. Weekly Jobless Claims data as well as the Chicago PMI and Kansas City Fed Manufacturing Activity leading indicators are likewise on tap.

WTI Crude Oil (NY Close): $96.58 // +0.24 // +0.25%

Prices broke resistance at 96.41, the 50% Fibonacci expansion, a barrier reinforced by a falling trend line set from late January. Buyers now target the 61.8% Fib at 98.09. The 96.41 level has been recast as near-term support, with a turn back beneath that exposing the 38.2% Fib at 94.74.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1605.25 // +5.21 // +0.33%

Prices are testing support at 1597.77, the 14.6% Fibonacci expansion, a barrier reinforced by a rising trend line set from late February (1596.09). A break below that exposes the 23.6% level at 1586.27. Near-term resistance is at 1616.98, the March 21 high, with a reversal above that aiming for a longer-term falling trend line at 1638.85.

Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $28.69 // -0.08 // -0.27%

Prices continue to consolidate above support at 28.46, the 23.6% Fibonacci expansion. A break below that exposes the 38.2% level at 27.86.Near-term resistance is in the 29.42-92 area, with a break higher targeting a falling trend line now at 30.06.

Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.444 // +0.002 // +0.06%

Prices are testing below support at 3.447, the 14.6% Fibonacci retracement. A break downward targets the March 19 swing low at 3.388. Near-term resistance is at 3.483, the 23.6% level, with a reversal above that aiming for 38.2% Fib at 3.542.

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

View the original article here

Euro Outlook Remains Weighed by Cyprus- Deeper Recession Ahead

By David Song, Currency Analyst 26 March 2013 11:35 GMT Talking Points

Euro: Cyprus to Face Deeper Recession, Capital Control for Weeks British Pound: U.K. Banks to Boost Capital, Retail Sales Slumps U.S. Dollar: Durable Goods, New Home Sales, Consumer Confidence on Tap Euro: Cyprus to Face Deeper Recession, Capital Control for Weeks

The Euro is struggling to hold above the 200-Day SMA (1.2874) even as European policy makers talk down the heightening risks surrounding Cyprus bailout, and the single currency may weaken further over the near to medium-term as the fundamental outlook for the region turns increasingly bleak.

Although Cypriot Finance Minister Michael Sarris talked down speculation for a euro-area exit, he warned of a deepening recession following the rescue, and said that the bail-in package sets a bad precedence for the monetary union as the capital controls on the periphery country are expected to last for weeks.

At the same time, Standard and Poor’s curbed its outlook for the euro-area as the group now sees the growth rate contracting 0.5% in 2013 versus an initial forecast for a 0.1% decline, and the deepening recession in the region may put increased pressure on the European Central Bank (ECB) to push the benchmark interest rate lower as the economic downturn threatens price stability.

Despite efforts to alleviate suspicions surrounding the Cyprus bailout, the EURUSD may continue to fall back towards the 1.2640-50 region – the 23.65 Fibonacci retracement from the 2009 high to the 2010 low – as the weakening outlook for growth and inflation foreshadows an ECB rate cut.

British Pound: U.K. Banks to Boost Capital, Retail Sales Slumps

The British Pound pared the advance to 1.5206 as the Bank of England (BoE) Deputy Governor Paul Tucker warned that U.K. institutions ‘need to repair themselves’ as the ‘economy requires sound banks ‘to recover.

As the Monetary Policy Committee maintains an accommodative policy stance, a central bank survey showed commercial banks are anticipating a ‘significant’ boost in capital during the second-quarter, but we way see the BoE continue to tolerate above-target inflation in an effort to stem the risk for a triple-dip recession.

As the Confederation of British Industry’s gauge for U.K. retail sales slips to the lowest level since August, the weakening outlook for growth may produce a more meaningful pullback in the GBPUSD, and the pair looks poised to face range-bounce prices over the near to medium-term as the exchange rate remains capped by a the 50.05 Fib from the 2009 low to high around 1.5260.

U.S. Dollar: Durable Goods, New Home Sales, Consumer Confidence on Tap

The greenback appears to be regaining its footing going into the North American trade as the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) stems the decline to 10,434, and the reserve currency may track higher throughout the day should the economic docket highlight an improved outlook for the U.S.

As the U.S. trade offers a good round of fundamental event risk, data pointing to a stronger recovery should heighten the appeal of the dollar, and the bullish sentiment surrounding the reserve currency may pick up as the developments coming out of the world’s largest economy dampens speculation of seeing additional Fed support.

FX Upcoming

Durables ex Transportation (FEB)

Non-Defense Capital Goods Orders ex Aircrafts (FEB)

Non-Defense Capital Goods Shipmet ex Aircrafts (FEB)

S&P/Case-Shiller Composite-20 s.a. (MoM) (JAN)

S&P/Case-Shiller Composite-20 (YoY) (JAN)

S&P/Case-Shiller Home Price Index (JAN)

Richmond Fed Manufacturing Index (MAR)

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

RelatedArticles: Weekly Currency Trading Forecast

New to FX? Watch this Video

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

26 March 2013 11:35 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: US Open'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Euro Eyes Cyprus Banks Open, Krona May Rise on German Data

By Ilya Spivak, Currency Strategist 28 March 2013 06:53 GMT The Euro looks toward the reopening of banks in Cyprus for direction cues while the Swedish Krona may rise if German jobs data tops expectations.

Talking Points

Swedish Krona May Rise if German Jobs Report Tops Expectations Euro Looks to Reopening of Cyprus Banks for Directional Guidance Yen Rose as Aussie Dollar Underperformed on Risk Aversion in Asia German Unemployment figures headline the economic calendar in European hours. Expectations call for the economy to add 2,000 jobs in March, keeping the unemployment rate unchanged at 6.9 percent for a sixth consecutive month. The March set of German PMI figures showed resilience in hiring despite weakness in overall private-sector activity. Indeed, Markit reported the strongest improvement in employment since January 2012, saying companies it polled cited “efforts to increase capacity and long-turn expansion plans.” Currencies geared to German growth – notably the Swedish Krona – may find support if that proves to foreshadow a better-than-expected outcome on today’s report.

As for the Euro itself, the focus remains on lingering uncertainty in Cyprus and political instability in Italy. Greek newspaper Kathimerini reported that Cypriot banks will finally reopen today and traders will be closely watching to gauge the effectiveness of capital controls installed to prevent a mass exodus of capital. Restrictions include a €300/day withdrawal limit and a ban on cashing checks. Taking more than €1000 in cash across the border is likewise now prohibited. A relatively orderly reopening may boost the single currency, social unrest or reports of banks flouting the new rules stand to yield the opposite result. Meanwhile in Italy, Democratic Party Leader Pier Luigi Bersani is expected to report that he was not able to forge a coalition today, clearing the way for President Napolitano to tap another politician to attempt to form a government.

Risk aversion gripped currency markets in overnight trade. The Japanese Yen outperformed, adding as much as 0.5 percent on average against its top counterparts as Asian stocks declined, boosting safe-haven demand and encouraging an unwinding of carry trades funded cheaply in the low-yielding currency. The Australian Dollar bore the brunt of risk-off flows in the FX space, sliding as much as 0.5 percent on average against the majors.

Asia Session:

TD Securities Inflation (MoM) (MAR)

TD Securities Inflation (YoY) (MAR)

GfK Consumer Confidence Survey (MAR)

Private Sector Credit (MoM) (FEB)

Private Sector Credit (YoY) (FEB)

BOJ Governor Kuroda Speaks at Parliament

Industrial Profits YTD (YoY) (FEB)

Euro Session:

Nationwide House Prices s.a. (MoM) (MAR)

Nationwide House Prices n.s.a. (YoY) (MAR)

German Retail Sales (MoM) (FEB)

German Retail Sales (YoY) (FEB)

German Unemployment Change (MAR)

German Unemployment Rate s.a. (MAR)

Index of Services (3Mo3M) (JAN)

Critical Levels:

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

28 March 2013 06:53 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: Euro Open'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Euro Unwinds Most of the Cyprus Deal Gains, Aussie Continues to Find Wind

By Benjamin Spier 25 March 2013 10:11 GMT Cyprus has managed to secure the Euro-zone’s 10-billion Euro bailout without hurting depositors with less than 100,000 Euros in their accounts, a deal that has sent risk appetite back into the markets. In an update to the deal, there were reports earlier that the Chair of the Cyprus Finance Committee said he believes the losses to large depositors will be 30%.

Although the deal doesn’t need approval from the Cyprus parliament, because of its bank restructuring basis, the deal does need the approval of its lenders in the Euro-zone and Germany. The Bundestag may have to vote to approve the bailout deal, but German reception thus far has been positive. Finance Minister Schaeuble said the aid deal represents the German position and the deal is fair. Merkel ally and lawmaker Michelbach noted that Cyprus must fulfill all conditions to get aid.

Most of the initial jump to 1.3075 in EUR/USD seen after the aid announcement has been unwound over the European session, but the key 1.3000 line seems to now be providing support. Resistance may be provided at 1.3055, by the 38.2% retracement of the fall from the pair’s all time high to its all time low.

Meanwhile, the risk appetite created by the Cyprus deal may have been somewhat responsible for the Australian Dollar setting a new two-month high against the US Dollar at 1.0471 duing today’s European session.

In economic releases, the Italian consumer confidence index was reported at 85.2 in March, slightly below expectations and lower than the 86.0 index in February. UK BBA Loans for House Purchases declined to 30,506 in February. Neither release had significant effect on Forex markets.

As this writing is being published, Italy will sell 2014 bonds and 2018,2023 I/L bonds. Italian 10-year bond yields have declined 5.9 bps today and the benchmark bond price is now trading above the point where it was before the elections that led to the current political stalemate in Italy.

(Did you understand all the terms used in today’s report? If so, test your skills with DailyFX’s Trading IQ Quiz.)

EURUSD Daily: March 25, 2013

Chart created by Benjamin Spier using Marketscope 2.0

--- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

25 March 2013 10:11 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: Opening Comment'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Euro Relief Rally Falters, Cyprus Faces Negative Consequences

By David Song, Currency Analyst 25 March 2013 13:20 GMT Talking Points

Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’ British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’

The Euro climbed to an overnight high of 1.3047 as Cyprus agreed to shrink its banking sector in order to obtain EUR 10.0B in emergency funding, but the lingering threat of a bank-run may present another near-term shock for the single currency as the governments operating under the monetary union struggle to get their house in order.

As Cyprus still needs to raise the EUR 5.8B required to secure the EUR 10.0B bailout, further development surrounding the rescue package may prop up the Euro over the next 24-hours of trading, and the relief rally may spark another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as European policy makers increase their effort to avert a euro-area exit.

However, Moody’s Investor Services warned that the banking crisis in Cyprus ‘will have profound long-term negative consequences for the sovereign’ and went onto say that the region ‘will remain at risk of default and exit from the euro area for a prolonged period’ as the periphery country remains mired in a recession.

As the ongoing turmoil in the financial system diminishes the longer-term outlook for the euro-area, the weakening outlook for growth and inflation may continue to dampen the appeal of the single currency, and we may see the periphery countries become increasingly reliant on external support as European policy makers maintain a reactionary approach in addressing the risks surrounding the region.

In turn, the European Central Bank (ECB) may have little choice but to further embark on its easing cycle throughout 2013, and the EURUSD may struggle to maintain the rebound from 1.2842 as the central bank remains poised to push the benchmark interest rate to a fresh record-low.

British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance

The British Pound failed to maintain the advance from the previous week, with the GBPUSD falling back below the 1.5200 figure, and the sterling may continue to consolidate in the coming days as the pair appears to be carving a near-term top just ahead of former support- the 50.0% Fib from the 2009 low to high around 1.5260.

Indeed, the British Pound struggled to hold its ground as a report by the British Bankers’ Association showed loans for home purchases increased 30,506 in February amid forecasts for a 33,500 print, and the sterling may struggle to maintain the rebound from the yearly low (1.4830) should the economic docket continue to a risk for a triple-dip recession in the U.K.

In turn, we may see the GBPUSD work its way back towards the 61.8% retracement around 1.4840-50, and the pair may face range-bound prices ahead of the next Bank of England (BoE) interest rate decision on April 4 as market participants weigh the outlook for monetary policy.

U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap

The greenback firmed up on Monday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from a low of 10,413, and the reserve currency may continue to gain ground during the North American trade as manufacturing activity in the world’s largest economy is expected to pick up in March.

Indeed, the Dallas Fed Manufacturing index is expected to increase to 3.7 from 2.2 in February, and we may see a growing number of Fed officials adopt a more upbeat tone for the world’s largest economy as the recovery gradually gathers pace. In turn, we may see New York Fed President William Dudley adopt an improved outlook for growth and inflation, and the FOMC may start to discuss a tentative exit strategy over the coming months as the region gets on a more sustainable path.

FX Upcoming

Dallas Fed Manufacturing Activity (MAR)

Fed's William Dudley to Speak on U.S. Economy

Fed's Bernanke, BoE's King, IMF's Blanchard Speak on Crisis

Trade Balance (New Zealand dollars) (FEB)

Balance (YTD) (New Zealand dollars) (FEB)

Exports (New Zealand dollars) (FEB)

Imports (New Zealand dollars) (FEB)

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

RelatedArticles: Weekly Currency Trading Forecast

New to FX? Watch this Video

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

25 March 2013 13:20 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: US Open'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

Euro Unimpressed by Cyprus Deal as Capital Flight Fears Linger

The Euro has shed earlier gains and now trades little changed after Cyprus and the EU agreed to a bailout deal as capital flight fears continue to linger.

Talking Points

Euro Yields Tepid Response to Cyprus Bailout Deal as Capital Flight Fears Japanese Yen Declined as Stocks Rose in Asia, Denting Safe-Haven Demand The major currencies are little changed in overnight trade. The Japanese Yen is broadly underperforming as Asian stocks advance, sapping demand for the regional haven currency. The MSCI Asia Pacific benchmark equity index has added 0.9 percent after Cyprus and the so-called “troika” (EU/ECB/IMF) agreed to measures paving the way for launch of the country’s bailout program. The Euro spiked higher as the news of the deal emerged but the single currency has since retreated as worries about the impact of the Cyprus fiasco on depositor confidence elsewhere in single currency bloc continue to swirl.

The package of measures emerging out of the weekend’s negotiations focuses most specifically on Laiki Bank, Cyprus’ second-largest lender. The bank will be split, with unsecured deposits (all those over €100,000) transferred to a so-called “bad bank” and eventually wound up. Losses to unsecured depositors from this move are being estimated at 30-40 percent. Secured deposits and performing assets will be moved to Bank of Cyprus. This process is expected to raise €4.2 billion. The Cypriot government will further use privatization and taxation to generate additional funding to move toward unlocking €10 billion in EU aid, a process expected to conclude by mid-April.

On balance, investors’ lack of enthusiasm for the bailout seems reasonable. The critical issue remains that of precedent for larger Eurozone countries, and the way in which the Cyprus situation has been managed does not seem to inspire a great deal of confidence. Depositors in countries with similarly sickly banking sectors (notably Spain) are unlikely to be greatly encouraged by the prospect of losing close to a third of their deposits over €100k with the EU’s blessing if trouble were to arise. Cyprus’ introduction of capital controls to prevent a bank run when lending institutions reopen for business, again with approval from Brussels, is unlikely to sit well also.

This raises the most important question of all: why should a depositor in Spain or a country similarly vulnerable to a banking crisis expect to be left unscathed if a Cyprus-like calamity were to befall them. If such an expectation is deemed unreasonable in light of today’s events, the depositor in question may well opt not to keep money in the Eurozone altogether, and he/she may not be alone. This leaves the markets waiting to see if a mass exodus of capital does indeed occur as the region digests the latest news-flow, for then the worst-case scenario will be upon the Eurozone whether or not Cyprus receives its aid.

Asia Session:

Hometrack Housing Survey (MoM) (MAR)

Hometrack Housing Survey (YoY) (MAR)

Euro Session:

Italian Consumer Confidence Index (MAR)

BBA Loans for House Purchase (FEB)

Italy to Sell 2014 Bonds, 2018-23 I/L Bonds

Critical Levels:

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

View the original article here

What if We’re Wrong About Cyprus and Jeroen Dijsselbloem?

By Christopher Vecchio, Currency Analyst 26 March 2013 22:00 GMT Let me preface this by first saying that by no means would I consider myself a Euro apologist. I think the Euro crisis has been poorly handled from the start, and that the latest period of calm is nothing short of a farce, only thanks to the European Central Bank’s efforts to do “whatever it takes” to save the Euro, back in July 2012. But an end might be in sight for the Euro-zone sovereign debt crisis – and it’s not an exit that anyone has been looking towards.

The past few days have been mired by endless speculation over the precedent the bailout of Cyprus might set for other peripheral countries. After all, the Euro project is about equality and unity; and given the progression of the crisis, we know that each step has set the precedence for the next step. That is to say, the Cypriot bailout – one which looped in depositors to take the fall for banks’ poor investing (gambling) decisions – is now considered a “template” for the rest of Europe. By now, everyone has recycled the fact first brought to light by The Economist in this week’s issue: of the 147 financial crises since 1970, none of them resulted in depositors taking losses before Cyprus, according to the IMF. This is a unique case indeed.

But is it really a unique case? Eurogroup President Jeroen Dijsselbloem seems to disagree. In a revealing joint-interview with the Financial Times/Reuters yesterday, Mr. Dijsselbloem said that:

“We should start pushing back the risks. If there is a risk in a bank, our first question should be: “Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?” If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: “What can you do in order to save your own banks?”

So then Cyprus is not a unique case, it is the “blueprint” (another one of Mr. Dijsselbloem’s carefully chosen words) for future bailouts. The Euro has been hit quite hard as a result of this comment, falling from just under $1.3000 against the US Dollar into the mid-$1.2800s in a few hours on March 25. Everyone, including myself, was focusing on the latter half of the quote: those uninsured deposit holders would join their constituents as candidates to recapitalize a downtrodden bank.

I posited this morning that “The big question now: if you have over €100,000 in a country whose banking system is on life support, do you feel that your money is safe?” This was a direct reference to Italy and Spain, the two countries closest to the core affected by the debt crisis. Mainly, I would be terrified if my savings were past the €100,000 threshold – news broke today that a Swedish EU member of parliament was setting forth legislation that would put uninsured deposit holders (over the said €100,000 threshold) on the chopping block ahead of tax payers for bailout proceedings. This is a big deal in the short-term, but maybe not in the long-term.

On second glance, the main point that everyone should be taking away from Mr. Dijsselbloem’s comments is the first part of the sentence, when he said “We should start pushing back the risks.” We need to go to the root of the crisis to understand where the risks are stemming from: the strong interrelationship between banks and their sovereigns. Banks buy sovereign debt, sovereigns invest in the banks – it’s an endless loop where each party has their hand in the other’s pocket as well.

To truly end the European sovereign debt crisis, this strong interrelationship needs to be severed. A potential tax on uninsured deposit holdings is just the way to end it.

Before Cyprus, when a bank needed bailouts, they would go to their sovereign for funds. The sovereign would recapitalize the bank, and in return, the sovereign would get an investment in the bank. With the European economy in the gutter, quite frankly, many banks’ losses keep piling up, putting further strain on the sovereigns, while the banks don’t see a true penalty; moral hazard. The public debt racks up, government revenues can’t keep up the pace to pay off their own debt, and voila: the sovereign needs a bailout as well.

We’ve all been led to believe that the European Stability Mechanism (ESM) would be the facility by which these sovereigns would receive emergency funding. But the ESM is derived from tax payer money, which in effect would mean that the connection between sovereigns and banks remains. Mr. Dijsselbloem said that “We should aim at a situation where we will never need to even consider direct recap.”Now, like in Cyprus, it’s clear that tax payers won’t contribute to bailouts going forward.

Essentially, Mr. Dijsselbloem has placed deposit holders in front of the tax payers for bailouts. Risk is now diverted away from the sovereign – the severing begins. But why is levying a deposit tax, if you will, the right move?

In short, depositors are the life blood of a bank. Without depositors, the bank collapses. If a bank in a peripheral country is taking on extra risk to generate windfall profits – a quick and haphazard way of trying to cover holes in the balance sheet – it will be forced to curb its risk taking in order to shore up Tier 1 capital ratios, thereby preventing panic among its depositors. In the instance of a crisis on the sovereign level, banks with higher capital ratios could withstand the impact of sovereign debt writedowns, and the ‘Greek sovereign-Cyprus financial’ loop won’t happen again in the Euro-zone.

Of course, to get to the end of the crisis now looks like a messy road – selling of assets to raise capital, which would likely put upward pressure on peripheral bond yields. The pace of raising capital could be quick, now that Mr. Dijsselbloem has seemingly fumbled his words, with many calling him ‘inept’ in his wake. Luckily, the ECB has its OMT safety net in place – the facility that has quite literally saved Italy and Spain – and with its key rate at 0.75%, it could easily slash 50-bps to cushion the economy amid balance sheet contractions.

There may be some words lost in translation, but Mr. Dijsselbloem is no idiot – he’s the President of the Eurogroup. I still believe that this crisis is going to get a lot worse – but I’m also considering the notion that Mr. Dijsselbloem may have unlocked the door to truly “pushing back the risks,” by changing the pace and direction of the Euro-zone crisis. Now that banks have skin in the game, the game is about to change.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

26 March 2013 22:00 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: Weekly Spotlight'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here

USD Rallies on Flight to Safety- Euro Hit by Cyprus Precedence

Chart - Created Using FXCM Marketscope 2.0

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is 0.30 percent higher from the open after moving 84 percent of its average true range, and the bullish sentiment surrounding the greenback may gather pace in the days ahead as the banking crisis in Cyprus rattles investor confidence. As the index bounces back ahead of former trendline resistance, the flight to safety my prop up the reserve currency in the coming days, while the broader fundamentals may help the greenback to retrace the decline from earlier this month as the economic outlook for the U.S. improves. However, as the 30-minute relative strength index pushes into overbought territory, we may see a small pullback over the next 24-hours of trading, and the dollar may continue to carve a short-term base ahead of the 10,400 region as the developments coming out of the world’s largest economy raises the prospects for future growth.

As the economic docket shows a more robust in the U.S., we may see New York Fed President William Dudley, who also serves on the FOMC, turn increasingly upbeat towards the economy, and we may see a growing number of central bank officials adopt a more neutral to hawkish tone for monetary policy as the region gets on a more sustainable path. In turn, a slew of positive developments should produce a move back above the 10,500 region, but the downward trend in the relative strength index may foreshadow further losses for the USDOLLAR as the oscillator approaches interim support around the 41 figure. Nevertheless, we will maintain our bullish outlook for the greenback amid the shift in the policy outlook, and the dollar remains poised to appreciate further over the near to medium-term as the central bank slowly moves away from its easing cycle.

The greenback advanced against two of the four components, led by a 0.76 percent decline in the Euro, and the single currency may weaken further in the days ahead as headlines surrounding the banking crisis in Cyprus drags on market sentiment. Indeed, Euro-group President Jeroen Dijsselbloem said the bailout package for Cyprus would serve as a new template for addressing financial turmoil in the euro-area, and the precedence set by the group may further dampen confidence in the euro-area as policy makers preserve a reactionary approach in addressing the risks surrounding the region. As the periphery countries struggle to get their house in order, we are likely to see the governments operating under the single currency become increasingly reliant on monetary support, and the EURUSD may struggle to maintain the range-bound price action carried over from the previous week as the fundamental outlook for Europe turns increasingly bleak. As the EURUSD remains capped by the 38.2 percent Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, we are still looking for a move back towards the 23.6 retracement (1.2640-50), but we would like to see a close below the 200-Day SMA (1.2873) to confirm our bearish forecast for the pair.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

New to FX? Watch this Video

Join us to discuss the outlook for the major currencies on the DailyFXForums

View the original article here

Euro Relief Rally Falters, Cyprus Faces Negative Consequences

By David Song, Currency Analyst 25 March 2013 13:20 GMT Talking Points

Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’ British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap Euro: Cyprus to Shrink Banks- Moody’s Warns of ‘Negative Consequences’

The Euro climbed to an overnight high of 1.3047 as Cyprus agreed to shrink its banking sector in order to obtain EUR 10.0B in emergency funding, but the lingering threat of a bank-run may present another near-term shock for the single currency as the governments operating under the monetary union struggle to get their house in order.

As Cyprus still needs to raise the EUR 5.8B required to secure the EUR 10.0B bailout, further development surrounding the rescue package may prop up the Euro over the next 24-hours of trading, and the relief rally may spark another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as European policy makers increase their effort to avert a euro-area exit.

However, Moody’s Investor Services warned that the banking crisis in Cyprus ‘will have profound long-term negative consequences for the sovereign’ and went onto say that the region ‘will remain at risk of default and exit from the euro area for a prolonged period’ as the periphery country remains mired in a recession.

As the ongoing turmoil in the financial system diminishes the longer-term outlook for the euro-area, the weakening outlook for growth and inflation may continue to dampen the appeal of the single currency, and we may see the periphery countries become increasingly reliant on external support as European policy makers maintain a reactionary approach in addressing the risks surrounding the region.

In turn, the European Central Bank (ECB) may have little choice but to further embark on its easing cycle throughout 2013, and the EURUSD may struggle to maintain the rebound from 1.2842 as the central bank remains poised to push the benchmark interest rate to a fresh record-low.

British Pound: U.K. Mortgage Demands Falter, Former Support Offers Resistance

The British Pound failed to maintain the advance from the previous week, with the GBPUSD falling back below the 1.5200 figure, and the sterling may continue to consolidate in the coming days as the pair appears to be carving a near-term top just ahead of former support- the 50.0% Fib from the 2009 low to high around 1.5260.

Indeed, the British Pound struggled to hold its ground as a report by the British Bankers’ Association showed loans for home purchases increased 30,506 in February amid forecasts for a 33,500 print, and the sterling may struggle to maintain the rebound from the yearly low (1.4830) should the economic docket continue to a risk for a triple-dip recession in the U.K.

In turn, we may see the GBPUSD work its way back towards the 61.8% retracement around 1.4840-50, and the pair may face range-bound prices ahead of the next Bank of England (BoE) interest rate decision on April 4 as market participants weigh the outlook for monetary policy.

U.S. Dollar: Dallas Fed Manufacturing, Fed’s Dudley on Tap

The greenback firmed up on Monday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from a low of 10,413, and the reserve currency may continue to gain ground during the North American trade as manufacturing activity in the world’s largest economy is expected to pick up in March.

Indeed, the Dallas Fed Manufacturing index is expected to increase to 3.7 from 2.2 in February, and we may see a growing number of Fed officials adopt a more upbeat tone for the world’s largest economy as the recovery gradually gathers pace. In turn, we may see New York Fed President William Dudley adopt an improved outlook for growth and inflation, and the FOMC may start to discuss a tentative exit strategy over the coming months as the region gets on a more sustainable path.

FX Upcoming

Dallas Fed Manufacturing Activity (MAR)

Fed's William Dudley to Speak on U.S. Economy

Fed's Bernanke, BoE's King, IMF's Blanchard Speak on Crisis

Trade Balance (New Zealand dollars) (FEB)

Balance (YTD) (New Zealand dollars) (FEB)

Exports (New Zealand dollars) (FEB)

Imports (New Zealand dollars) (FEB)

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

RelatedArticles: Weekly Currency Trading Forecast

New to FX? Watch this Video

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

25 March 2013 13:20 GMT

// SET PAGE PROPERTIES var sProperties = new Object(); sProperties.server = '2.6'; sProperties.channel = 'Fundamental: US Open'; // Pass page properties to Omniture if (typeof sProperties != 'undefined') { for (var sProperty in sProperties) { s[sProperty] = sProperties[sProperty]; } } var s_code=s.t(); if(s_code) document.write(s_code);

View the original article here