Forex research

[Alpari_UK]

[B]Cyprus finance minister claims loan deal with Russia[/B]

Today’s UK opening call provides an update on:

[ul]
[li]Cyprus finance minister claims loan deal with Russia;
[/li][li]Loan may not be enough to stop a run on Cypriot banks;
[/li][li]Bank of England minutes released this morning from March meeting;
[/li][li]Chancellor George Osborne to deliver the annual budget in parliament;
[/li][li]Fed to discuss QE3 at meeting today, press conference follows tonight.
[/li][/ul]

European stock index futures are pointing to a higher open this morning, after Cyprus’ finance minister Michael Sarris claimed a loan deal with Russia could be agreed today.

Sarris flew to Russia last night, following rumours that the president had rejected his resignation, to negotiate a loan deal after the bailout package proposed by the eurogroup was rejected outright in parliament, with no ministers voting in favour of a levy of Cypriot deposits.

A loan from Russia, which will probably see the country get a future stake in the Cyprus’ offshore gas reserves, is the preferred option at this stage as it would protect savers in the short term. However, unless President Nicos Anastasiades now resigns, we’ll probably still see a run on the banks as people look to protect their savings from any future deal with the eurozone. It’s all about damage limitation now for Cyprus, who have to earn back the trust very quickly of the very people they tried to steal from, or we could see the banking system collapse in a matter of days.

First up this morning we have the release of the minutes from the MPC meeting earlier this month, which will tell us whether any more members joined Sir Mervyn King in voting in favour of additional asset purchases. The vote is expected to have been even closer than in February, with four members voting in favour of more stimulus, meaning only one more vote at the April meeting would be enough to see the asset purchase facility increased by £25 billion.

The voting is expected to be very close again in April, so the minutes of the March meeting should provide useful insight into whether any of the members that voted against it were seen leaning towards a yes vote. If not then this could go on for a few more months yet, especially given that inflation has just risen again to 2.8%. With Mark Carney set to replace King as the Bank of England Governor on 1 July, we could see members hold out until then to make any significant changes.

The UK unemployment figure will be released at the same time as the minutes and is expected to remain at 7.8% in January, with jobless claims falling by another 5,000 in February.

Just after midday we’ll hear from Chancellor George Osborne as he delivers the UK’s annual budget. This is expected to be one of the more predictable budgets, given that a number of measures which will come into place in April have already announced in previous budgets, such as the reduction in the top rate of tax to 45 percent. Further cuts are expected from Osborne, who is on course to miss his borrowing targets for the year, with areas such as welfare likely to be targeted yet again.

Market reaction to today’s budget is likely to be minimal, given that Osborne is not expected to address the biggest problem facing the UK at the moment, a lack of growth and a looming triple dip recession. Instead, the focus will remain on austerity, with Osborne claiming that the plan is working, while citing the recent downgrade from Moody’s as a warning that the UK must continue along the path of austerity.

Finally today, we’ll hear from Fed Chairman Ben Bernanke, following the two day meeting of the Federal Reserve. The Fed’s $85 billion per month of asset purchases is expected to have been discussed in depth at this meeting, after some members raised concerns in recent months about the risks and costs of the program. The press conference after will be watched very closely for signs that the Fed could begin to scale back its asset purchases this year.

Any hints from Bernanke that the Fed will begin scaling back will create some panic in the markets, given that the asset purchases have contributed significantly to the rally in stocks over the last six months, which has seen the Dow hit all time highs and the S&P 500 come within touching distance of its own highs.

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Osborne budget up next, followed by Fed press conference[/B]

Today’s US opening call provides an update on:

[ul]
[li]Cyprus Finance Minister hopeful of Russian loan to avoid levy on bank deposits;
[/li][li]Risk of bank run still there, government may be forced to impose capital controls;
[/li][li]MPC vote unchanged at 6-3 in March as policy makers raise concerns over weak pound;
[/li][li]Chancellor George Osborne prepares hit annual budget;
[/li][li]Bernanke to wrap things up today with Fed press conference following its monthly meeting.
[/li][/ul]
European stock indices are trading higher on Wednesday, after Cypriot Finance Minister Michael Sarris claimed a Russian loan deal could be done today.

A loan from Russia is clearly the preferred option now for Cyprus, given that any bailout from the eurozone will include a bail in, in the form of a levy on bank deposits. This was rejected last night in a vote in Cyprus’ parliament, with not even a single MP voting in favour of it, which suggests that negotiations between the eurozone and Cyprus are dead in the water.

The problem now facing Cyprus is the fact that, even if a deal with Russia is done, we’ll probably still see run on Cypriot banks with savers fearing that their money is no longer safe. The only chance that Cypriot banks now have of not collapsing is if the government imposes capital controls to stop the flight of money out of the country’s banks.

A deal with Russia is clearly seen as the best option in the markets, where investors are piling back into risk assets. Stock indices are in the green across the board in Europe and futures are pointing to a similar open in the US.

In the UK, the pound has been rallying this morning after minutes from this month’s MPC meeting showed that the vote remained at 6-3 against a further £25 billion of quantitative easing. With Bank of England Governor Sir Mervyn King voting in favour of additional stimulus last month, the vote was expected to be a little closer at 5-4 at the March meeting which would have opened the door to more stimulus next month.

This looks extremely unlikely, not only because the vote remained as it was in February, but also because some members raised concerns that piling more cash into the financial system would further depreciate the pound. This clearly shows that the MPC are divided over whether a weaker currency is better for the economy after King himself claimed last month that a weak pound could help exports and is therefore not necessarily bad for the economy.

Next up we have the annual budget in the UK, where Chancellor George Osborne will outline how he plans to get the economy growing again, despite expectations of further cuts to the budget. The market reaction to the budget is likely to be minimal though, with any reaction we do see probably being negative in response to lowered growth forecasts and a further set back in the government’s attempts to cut the structural deficit to zero by 2018.

Finally today the focus will be on the US, when Ben Bernanke gives a press conference following the meeting of the Federal Reserve. The Fed are expected to discuss its QE3 program, in which it purchases $85 billion per month of government bonds and mortgage-backed securities, due to the concerns raised at recent meetings over the costs and risks of the program. No change is expected in the coming months to the program, however people will be looking for clues as to when we can expect it to start to be scaled back. This is hugely important for the markets given that it has been largely responsible for the rally in stocks over the last six months that has seen the Dow hit, and S&P coming within touching distance of, all time highs.

[B]Dollar Cad retraces, yet is it a retracement or a reversal?[/B]

The USDCAD pair have been trading in a form of consolidation of the move higher throughout February. The price action is moving downwards and subsequently it is helpful to understand whether it looks like we are in a mere temporary pullback from a greater move to the upside, or about to see a recovery towards levels of 1.00.

Looking at two key indicators, the impetus is clearly geared towards a further move to the downside, which is being compounded by today’s price action. The stochastic has turned towards the downside and moved out of overbought, while the CCi is pointing downwards in a move towards neutral territory. However, there has been a clear respect of the Fibonacci levels (Feb low to March high) and these will clearly continue to provide significant support should we see further downside action.

The ability to push below the 23.6 Fibonacci level of 1.02454 is key and should we see another push in a similar way to that seen earlier in the week would likely introduce a more bearish tone to this pair. However, I am closely watching for a push towards the upside and out of this channel in order to bring about a shift back towards the 1.034 level and above.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Kuroda gives his first press conference as BoJ Governor[/B]

Today’s UK opening call provides an update on:

• Eurozone manufacturing and services PMIs expect to improve slightly in March;
• All eyes on Kuroda as he gives his first press conference as BoJ Governor;
• UK retail sales rise in February;
• UK government on course to borrow £121 billion this year;
• Interest in Spanish auction may be hampered by uncertainty in Italy and Cyprus.

As always, the manufacturing and services PMI’s in the eurozone will be watched closely this morning. These figures have significantly improved in many of the countries in the euro area in 2013, although in France they have both repeatedly been deep in contraction territory in the low 40’s.

A small improvement is expected to be seen across the board in these figures this morning, however the current forecasts don’t appear to take into account the potential knock on effect of the Italian elections or the Cypriot bailout on sentiment. As a result, I wouldn’t be surprised to see these figures come in a little below expectations, as both of these issues pose a very real threat to the recovery in the eurozone.

Haruhiko Kuroda is due to hold his first press conference as Bank of Japan Governor at 09.00 GMT, in which he may outline the central banks new plans to overcome deflation and hit the new 2% inflation target. This is likely to include large amounts of asset purchases and potentially some more unconventional measures, which Kuroda may hint at this morning.

The press conference this morning could prompt the second phase of yen weakening, especially if Kuroda hints at bringing the open ended bond buying program forward from 1 January 2014, as he has suggested previously. There was also speculation recently that he wouldn’t wait until the first meeting to begin easing, which is even more reason why traders will be watching this press conference very closely.

In the UK, we have retail sales figures due out at 9.30, which are expected to show an increase of 0.5% in February. Given that the UK looks to be flirting with the possibility of a triple dip recession, this figure will be watched very closely as consumer spending makes a significant contribution to the country’s GDP.

George Osborne sounded pretty convinced in the House of Commons yesterday that the UK will avoid a recession in the first quarter of 2013, which suggests this figure could be a little better than is currently forecast. However even if it comes in below expectations, with the threat of recession appearing to not be there, it will be interesting to see just how negative the reaction now is.

It’s a shame Osborne was quite as confident about the government’s ability to reduce spending this year or next, with the public sector net borrowing figure expected to show the government ran a deficit of £8.25 billion in February, leaving them on course to borrow around £121 billion this year, around the same amount as last year and similar to the figure forecast for next.

A Spanish bond auction of two, five and ten year debt this morning should be interesting given the current situation in both Italy and Cyprus. Yields have been coming down at recent Spanish auctions however the political uncertainty in Italy and uncertain future of Cyprus in the eurozone is surely going to have an impact on people’s willingness to take on the additional risk associated with holding Spanish debt. I don’t expect to see a significant rise in the interest paid today, however I do expect to see a small rise to reflect the current uncertainty in the region as well as a small drop in the participation in the auction.

[B]EURUSD[/B]

This pair has been in a downward trend since it peaked around 1.3710 back at the start of February. Last week it threatened to break out of this trend when it closed above the descending trend line on Friday, however a botched bailout for Cyprus over the weekend saw the pair open more than 150 pips lower on Monday. Now it looks like the pair has broken out of the trend once again, which is pretty bullish in the short term. The next big resistance level should be 1.2955 which provided strong support for the pair over the past few weeks. A break above here should see the pair target 1.3106, last Friday’s highs, however it could find further resistance around 1.2974 and 1.3005, from the 50 and 61.8 fib levels.

[B]GBPUSD[/B]

Sterling is pushing higher again this morning, after the Bank of England minutes yesterday suggested we won’t see any more quantitative easing in the coming months. Until yesterday, the pair had been in a small downtrend, however a doji candle on Wednesday suggests we may see the pair edge higher towards the end of the week. If we do, the next target for the pair should be yesterday’s highs around 1.5185, followed then by 1.53, which is going to be a key level. The pair should find resistance along the way around 1.5220 and 1.5250.

[B]USDJPY[/B]

The dollar is trading lower against the yen this morning, as the pair continues to consolidate following a sharp move higher over the past six months. The pair is expected to move higher again in the coming months, once the Bank of Japan begins its large scale asset purchases, something new Governor Haruhiko Kuroda could hint at in his first press conference today. If not, we could see the pair edge lower again, with the next levels of support coming around 94.70 and 94.50. On the upside, the pair could find resistance around 96.12, 96.25 and 96.58.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

Cypriot seek Russian loan - 0:10
Eurozone PMI figures disappoint - 3:52
UK retail data beats expectations - 4:41
Japanese Governor Kuroda speaks for the first time - 5:00

Forex research: Global markets daily

[Alpari_UK]

[B]Cyprus staring down the barrel of a default[/B]

Today’s UK opening call provides an update on:
• Risk aversion expected on Friday;
• Cyprus left between a rock and a hard place;
• Cypriot banks may collapse as ECB threatens to pull the plug on ELAs;
• German Ifo figure forecast to rise slightly.

We’re likely to see some risk averse trading again on Friday, after failed talks with Russia left Cyprus with few options still on the table.

Cyprus is staring down the barrel of a default this morning, after its finance minister failed to secure additional loans from the country’s Russian allies. To make matters worse, the ECB’s threat to withdraw its emergency liquidity assistance (ELAs) means the country now has a very difficult decision to make, default or deposit tax, and only a few days to make it. Either of these outcomes is not only bad for Cyprus, the whole debacle has done huge damage to people’s confidence in the eurozone banking system.

The only thing that has given people any hope for the eurozone this year was that confidence was beginning to return, and that was shattered last weekend when the eurogroup gave Cyprus an ultimatum of default or tax savers. It has taken years for the eurozone leaders to convince people in the region that neither of these options were ever on the table, so to leave Cyprus with a choice between the two has actually done untold damage to the euro area as a whole.

This is going to be a massive weekend for both Cyprus and the eurozone. With so much uncertainty over what the outcome will be, we’re going to see plenty of risk aversion in the markets today. We’ll especially see this towards the end of the day if no deal looks like being done. Last weekend was a warning, with big gaps forming between Friday’s closing price and the opening prices at the start of the week, and traders will not want to take the risk this week.

The German Ifo business climate figure due out this morning is forecast to rise slightly from a month earlier to 107.6. However, if yesterday’s disappointing manufacturing and services figures are anything to go by, we could see it fall short, with the ongoing political uncertainty in Italy, stalling Cypriot bailout and faltering French economy beginning to weigh on that renewed confidence in the euro area.

[B]EURUSD[/B]

The euro remained under pressure yesterday, as heavy selling pushed it back below 1.29 against the dollar, heading into the final day of the week. The euro has a huge support level below 1.29, from a combination of the 200 day SMA and the 50 fib level. 1.2875 was also previously a major level of support and resistance for the pair. A weekly close below these will be very significant for the pair, prompting a move back to the previous lows of 1.2661, where it will also find support from the 61.8 fib level.

[B]GBPUSD[/B]

Sterling continued to edge higher on Thursday, and is heading in the same direction again this morning. Until now, 1.53 has looked like the obvious target given that it was a major support level previously, however the formation of an inverse head and shoulders may have changed that. We could now see the neckline of the formation, around 1.52, act as a new resistance level, sending the pair back towards 1.49, where it failed to break below earlier this month. Alternatively, if the neckline is broken, based on the size of the formation, this would prompt a move towards 1.55. The break higher would also be supported by the bullish engulfing pattern on the weekly chart.

[B]USDJPY[/B]

The dollar is lower again this morning, finding support at the moment around 94.50, a previous level of resistance. This is also the 38.2 fib level, which should provide additional support for the pair. A break below here looks unlikely at this stage, however we could see further pressure on this level throughout the day. In the longer term I expect the pair to start to edge higher, with the Bank of Japan meeting fast approaching, when an aggressive round of stimulus is expected to be announced.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Cyprus to choose between default and humiliating bailout[/B]

Today’s US opening call provides an update on:

[ul]
[li]Cyprus left with two choices, default or a humiliating bailout program;
[/li][li]ECB to withdraw ELA for Cypriot banks;
[/li][li]Risk aversion and low trading volumes expected today;
[/li][li]German Ifo misses expectations as Italian and Cypriot problems weigh on confidence.
[/li][/ul]
Cyprus is going to remain centre stage on Friday, after loan talks with Russia fell apart leaving Cyprus stuck between a rock and a hard place.

Cyprus is now staring down the barrel of a bailout after the government rejected the EU bailout package earlier in the week, which included a one-off levy on bank deposits. The offer from the EU is still on the table, however Cyprus’ potential creditors are refusing to budge on the terms, claiming a bailout of anything more than €10 billion would leave the country’s debt at unsustainable levels.

The ECB hasn’t helped matters, threatening to withdraw its emergency liquidity assistance (ELAs) from Cypriot banks if a deal isn’t done by next week. Given that this would quickly see the country’s banks collapse, followed shortly after by the economy, Cyprus effectively has the weekend to choose between imposing a hugely unpopular levy on deposits that it previously promised not to do, followed by years of austerity and rising unemployment – if Greece is anything to go by – or defaulting on its debt, which could see its banks collapse anyway and the economy fall heavily into recession.

As a result, traders are likely to be extremely risk averse on Friday. If there was one thing to learn from last weekend, it’s that you don’t want to leave risky positions open over the weekend as it could easily come back to bite you.

The German Ifo business climate figure this morning has done nothing to boost sentiment this morning, becoming the latest survey out of the eurozone to fall short of expectations. Manufacturers were said to be less optimistic than in February, which is hardly surprising when you consider the political instability in Italy and the turmoil in Cyprus.

We’re likely to see more risk aversion in the US session today, with the situation in Cyprus continuing to drive sentiment. There’s no economic releases out of the US today, following the busy schedule yesterday so this will probably contribute to the lower volumes.

[B]Euro sterling continues to take bearish tone after Cypriot crisis breaks price below key support[/B]

Euro sterling has seen some fairly significant losses over the past week, much of which is to be expected given the ongoing crisis in Cyprus. The upshot of this has been a push downwards which is consistent with the bearish sentiment I have held since the price action hit the upper boundary of a four year descending channel.

The weekly chart provides an overview of the post credit crisis downturn. This provides a clear indication of the development of lower highs and lower lows which make up the descending channel. The past month has twice touched the upper boundary to this channel and given the existence of the 50.0 Fibonacci retracement, it was always likely that the resistance around that region could spark a reversal. Add to this the overbought RSI and stochastic indicators, the bearish picture was clear for all to see.

The beginning of this week gapped out the opening price of the week, which coincided with the 38.2 Fibonacci level and subsequently I look to that level as a point of resistance should we see any further move to the downside. Subsequently I continue to view this pair with a bearish tone, however the ongoing Cypriot crisis is likely to have an effect as it progresses.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

Cyprus bailout - 0:09
Options for Cypriot government - 0:54
Impact of Cyprus bailout on the markets - 2:35
German Ifo figure - 3:45
CHART – EURUSD analysis - 4:54

Forex research: Global markets daily

[Alpari_UK]

[B]Cyprus succumbs to depression[/B]

Today’s UK opening call provides an update on:

• Cyprus accepts a bailout from the Troika;
• Cyprus facing bank run even if capital controls are put in place;
• King and Bernanke take part in panel discussion at LSE;
• Fed’s Dudley to speak at the Economic Club, in New York.

Cyprus’ government opted for the lesser of two evils last night, accepting a bailout from the Troika that will undoubtedly send the country deep into recession.

The only other alternative was to default on its debt and exit the eurozone, which despite sounding like a great idea to many, would have probably resulted in the collapse of the country’s banking sector, leaving the country in an even worse recession that it is going to find itself in.

The only question now is, how will the country prevent a run on the banks now that they have agreed to a levy on all deposits above €100,000? This is very unlikely to be the only bailout deal for Cyprus, which means there’s likely to be further levy’s imposed on deposits. Therefore, even if capital controls are put in place, it will only slow the run on the banks rather than stop it altogether.

The reaction we saw to the deal overnight in Asia was very positive, with investors clearly agreeing that the Cypriot government made the correct decision, finally. We’re expecting a similar reaction when the European markets open this morning, with equity index futures pointing to higher open of around 1%.

Eurozone issues aside, the economic calendar today is looking very light. In fact, the only notable releases will be the Dallas Fed manufacturing index, which has been positive for three months now. Another positive figure here will be further evidence that the US economy is continuing to improve in 2013, despite more downside expected in many of the other major economies.

Shortly after the close in the UK, we’ll hear from both the Chairman of the Federal Reserve, Ben Bernanke, and the Governor of the Bank of England, Sir Mervyn King. Both are due to take part in a panel discussion at the London School of Economics, which given the recent change in the BoE’s mandate, should provide some insight into King’s views on the more unconventional approach that appears to be working in the US.

That being said, any unconventional approach is unlikely during the remainder of King’s term. However he may provide insight on the thoughts of the remaining members, whose support is needed for any unconventional policy to be passed.

In the US, Ben Bernanke was perfectly clear on the policy of the Federal Reserve at the recent press conference. Therefore, the comments of voting member William Dudley are unlikely top have much of an impact in the markets, especially given that much of the focus is going to be on what’s happening in Cyprus.

However, it is always worth paying attention to this as, despite the fact that Bernanke made it clear that no changes to monetary policy will occur in the coming months, Dudley could hint at when it will.

[B]EURUSD[/B]

The agreement between Cyprus and the Troika gave the euro a boost this morning, pushing it back above 1.30 against the dollar. The pair is currently finding resistance around 1.3040, however I expect to see to extend these gains early in this morning’s session. The next target for the pair will be 1.3106, where it should find resistance from the 38.2 fib level. Above here the pair should find further resistance around 1.3120 from the 100 day SMA. Given that the pair found support last week from the neckline of the inverse head and shoulders, and the stochastic has now crossed and broken out of oversold territory, we could now see a gradual move towards 1.42, although it will probably be the end of this year before the pair hits this target.

[B]GBPUSD[/B]

Sterling is continuing its push towards 1.53 this morning, after breaking the neckline of the inverse head and shoulders on Friday. This is going to be a very important level for the pair, with a failure to break above here likely to prompt a move back towards 1.49. A break above, should see the pair target 1.5550, based on the size of the inverse head and shoulders. For now, the pair appears to be finding resistance around 1.5250, however I expect to see it edge higher today, finding temporary resistance again around 1.5270, before reaching 1.53.

[B]USDJPY[/B]

The dollar is trading slightly higher against the yen this morning. The pair found resistance once again last week around 94.50, a previous resistance level and the 38.2 fib retracement. At the moment, I can’t see the pair breaking below here, with the Bank of Japan expected to announce aggressive monetary easing measures next week. The next major resistance level for the pair will be its previous highs 96.12, followed by 96.70. Once we see a break of the latter, the pair should target 97.6, with a break above here prompting a move towards 100.45.

[B]EURGBP[/B]

The euro found support last week from the 200 week SMA, forming a perfect doji in the process, which is quite a bullish signal. This morning, the pair is trading higher, but is likely to find resistance once again around 0.8575, from the 61.8 fib level. If if breaks above here, the next target will be 0.8780, where it will find further resistance from the descending trend line, dating back to December 2008.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Europe higher on Cypriot bailout deal[/B]

Today’s US opening call provides an update on:

[ul]
[li]Cyprus avoids eurozone exit, tough times lie ahead;
[/li][li]Bank run still on the cards;
[/li][li]Markets react positively to Cypriot bailout deal;
[/li][li]Bernanke and King to take part in panel discussion at London School of Economics.
[/li][/ul]
Cyprus has avoiding becoming the first country to default on its debt and exit the eurozone, after agreeing on a bailout with the Troika over night.

It has been a birth of fire for Nicos Anastasiades and his government, who had to choose between a bailout from the Troika, which would include a levy on bank deposits, and the country defaulting on its debt. It was never going to be an easy decision for Anastasiades, with both options likely to leave the country deep in recession for the foreseeable future. The only benefit of the latter is the fact that the country’s financial system has a chance of avoiding collapse.

That being said, even with capital controls being put in place, a gradual run on the banks is inevitable, unless the country can guarantee that no further levy’s will be applied. The only problem here is that it can’t. The country will now fall heavily into recession, leaving the country needing another bailout, if Greece is anything to go by. Given that the Troika didn’t want Cyprus’ debt reaching unsustainable levels, that only leaves two options, another levy or some form of debt forgiveness. The latter is unlikely while the country is still in the process of carrying out the required austerity and reforms, leaving only one option.

While those in Cyprus will be deeply unhappy with the deal, the news of an agreement has been welcomed in the markets. European equity indices are in the green across the board this morning, while the euro is trading back above 1.30 against the dollar and safe have bonds yields are creeping higher.

One thing that will be welcomed in Cyprus is that those deposits under €100,000 will not be touched. Well, not on this occasion anyway. Rather than give savers confidence though, this will just be viewed as a warning that their money is not safe in Cypriot banks and therefore a run on the banks will still happen.

While Cyprus is going to remain at the forefront of traders’ minds on Monday, there are a couple of other noteworthy events today. For example, Federal Reserve Chairman, Ben Bernanke, and Bank of England Governor, Sir Mervyn King, will be part of a panel discussion at the London School of Economics shortly after the European close.

With Chancellor George Osborne announcing the changes to the Bank of England’s remit during the budget last week, it will be interesting to hear King’s views on the matter. Bernanke is likely to be a major advocate of the new remit, given that it has been designed to mirror that of the Fed’s in many ways, such as the ability to use forward guidance on rates. While King is unlikely to use the more unconventional measures in his final few months in charge, we could get some insight into the views of the other policy makers and whether they’d be inclined to support such measures.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Cyprus agrees bailout with the Troika;
1:30 What next for Cyprus?
2:31 What next for the eurozone?
3:28 Panel discussion at LSE with Ben Bernanke and Sir Mervyn King.

Forex research: Global markets daily

[Alpari_UK]

[B]Dijsselbloem attempts to clarify comments fall on deaf ears[/B]

Today’s UK opening call provides an update on:

[ul]
[li]Markets unconvinced by Dijsselbloem efforts to clarify earlier comments;
[/li][li]Cyprus bailout to dominate markets again today;
[/li][li]UK CBI realised sales expected to rise in March;
[/li][li]US consumer confidence and home sales remain strong in February.
[/li][/ul]
European equity index futures are pointing to a slightly higher open on Tuesday, after plummeting yesterday on bizarre comments from the new eurogroup President Jeroen Dijsselbloem.

Dijsselbloem caused widespread panic in the markets on Monday, when he claimed the Cyprus bailout deal could be used as a template for other eurozone countries. Considering the risks associated with the levy on deposits which could prompt bank runs in other countries at the first sign of bailout discussions, this was an incredibly dumb thing to say.

Eurozone leaders have repeatedly stressed in the last couple of weeks that Cyprus is a “one-off” and a “special case”, however these comments just go to show that we were right to be sceptical. Dijsselbloem later attempted to clarify his comments, however these were clearly ignored, with once again, the damage already being done. Eurozone leaders have worked tirelessly to regain the confidence of the markets and this clearly shows, firstly, just how fragile it is, and secondly, how the comments they make in public to restore confidence are far from what is discussed behind closed doors.

As far as today is concerned, I expect the Cyprus bailout to continue to dominate the markets, with sentiment being driven by any additional details that are leaked. There’s no economic data due out of the eurozone this morning, with the only major release in the UK being the CBI realised sales, which is expected to show sales picked up again in March, with a figure of 12.

This should improve during the US session though, with a few key pieces of data due to be released. US core durable goods order are expected to have improved again in February by 0.7%, which is a slower rate than seen in previous months, however it still represents a sixth consecutive rise so remains a positive.

CB consumer confidence is expected to have risen again to 68, providing further evidence that US consumers have not been discouraged by the tax hike at the start of the year or the sequester that followed in February. Finally is the US new home sales, which are expected to be 420,000 in February, down slightly from January, but still a very strong figure.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Quiet start in Europe, US data in focus next[/B]

Today’s US opening call provides an update on:
[ul]
[li]Dijsselbloem attempts to backtrack on bail-in comments fall on deaf ears;
[/li][li]European stocks and the euro mixed after falling off a cliff yesterday;
[/li][li]US core durable goods orders expected to increase for sixth consecutive month;
[/li][li]Consumer confidence remains strong in the US.
[/li][/ul]
There’s an element of caution in the markets on Tuesday, following comments by eurogroup President, Jeroen Dijsselbloem, yesterday which weighed heavily on sentiment.

Dijsselbloem’s efforts to backtrack on his earlier comments could not have been much more unsuccessful. Once again, the damage has been done and it’s going to be very difficult for Dijsselbloem or any other officials to fix this in the short term. For evidence of this all you have to do is look at the reaction in the markets.

The euro, along with European equity indices, plummeted shortly after the original comments. Since then we’ve seen only a small retracement, which is unusual even when there is no attempt made to retract comments. This is a clear message that people aren’t convinced that deposits in other countries are safe from a similar levy, which is bad news if another country enters negotiations over a bailout in the future.

We’re likely to have plenty of comments from eurozone officials today, as they attempt to clear up Dijsselbloem’s mess and bring some calm to the markets. Confidence in the eurozone is pretty low at the moment though, so I expect them to have minimal impact.

The US session could help revive the markets, with some strong figures expected to be released. The improvement in US core durable goods orders is expected to have slowed slightly in February, however a jump of 0.7% is still largely positive.

An increase in the CB consumer confidence figure to 68 is very positive for the US. Consumer spending makes up a large chunk of GDP, so further increases here in the coming months can only be positive. US home sales is another area that has improved significantly over the last six months, and a figure of 420,000 in February suggests the trend is going to continue well into this year.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:36 Comments from eurogroup President Jeroen Dijsselbloem on Cypriot bailout;
2:25 Latest on Cyprus;
3:23 What to look for this afternoon.

Forex research: Global markets daily

[Alpari_UK]

[B]Eurozone sentiment tested as Cyprus saga drags on[/B]

Today’s UK opening call provides an update on:

[ul]
[li]Investors seek further details on Cyprus bailout deal;
[/li][li]Cypriot bailout expected to weigh on eurozone sentiment;
[/li][li]Final GDP figures for France and the UK leave both countries on the verge of recession;
[/li][li]Italy hoping debt auction runs smoothly despite political uncertainty.
[/li][/ul]
We’re looking at a slightly higher open in Europe this morning, as eurozone officials iron out the final details of the Cypriot bailout and banks prepare to reopen tomorrow after almost two weeks of being closed.

We could get further details of the bailout this morning, such as the size of the levy being imposed on accounts above €100,000. What people may be more interested in at this stage though is the capital controls that will be put in place in order to prevent a run on the banks when they reopen tomorrow. Cypriot officials have claimed in the last couple of days that these will be light and temporary, however I fail to see how any temporary measures will prevent an inevitable run on the banks.

German consumer confidence data will be released first this morning, and is expected to remain at 5.9, following three consecutive months of increases. It is worth noting that all eurozone surveys for March and April will be prone to temporary drops, with recent events in Italy and Cyprus likely to weigh on consumer and business sentiment. Germany is not exempt from this, despite having a more robust economy than many of its neighbours.

This will be most clearly seen in the eurozone business climate, consumer confidence, industrial confidence and services sentiment figures released at 10.00. All of these figures are expected to pull back slightly in March, however I expect recent events to have had a greater impact on these surveys, so wouldn’t be surprised to see them fall well below expectations.

Final fourth quarter GDP figures will be released for both France and the UK this morning, with both of them expected to confirm that the countries are at risk of recession in the first quarter of this year, following a contraction of 0.3%. The UK current account figure won’t make for much better reading, falling back to a deficit of £12.7 billion, following a rare surplus in the third quarter.

Italy will attempt to raise around €7 billion at a debt auction today, which includes a €3 billion offering of 10-year bonds. Yields on Italian debt spiked following the inconclusive election last month, however these have since fallen back to pre-election levels despite the fact that the country looks set to return to the polls in the coming months.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Cyprus bailout continues to weigh on sentiment[/B]

Today’s US opening call provides an update on:

[ul]
[li]Europe lower as Cyprus bailout weighs on sentiment;
[/li][li]Consumer confidence remains high in Germany;
[/li][li]France confirmed on the brink of recession;
[/li][li]US pending home sales to fall in February.
[/li][/ul]
Stock indices are a little lower in Europe this morning, as the ongoing issues in Cyprus continue to weigh on sentiment.

We should get more details out of Cyprus this morning about the bailout, with banks due to reopen tomorrow and no capital controls still being in place. It wouldn’t surprise me if the reopening of the banks was put back again until later in the week, or even next week, because light capital controls are unlikely to do much to prevent a run on the banks, especially if the measures are only put in place for a few weeks, as has been suggested.

The Gfk consumer confidence figure for Germany remained at 5.9 for April, despite political issues in Italy and the ongoing bailout of Cyprus threatening to hit confidence. The confidence figures out of the eurozone a little later may not show quite as much resilience though, with expectations already of a small drop.

There was no change in France’s fourth quarter GDP figure when it was released this morning. The economy contracted by 0.3%, leaving it on the brink of its third recession since the financial crisis began back in 2008. It’s not likely to get any better for France this year either, with recent data pointing to a prolonged period of contraction in both the services and manufacturing sectors, while unemployment is continuing to head in the wrong direction.

The economic calendar is looking a little lighter in the US today. Pending home sales are expected to fall slightly in February, following a drop in the number of new home sales yesterday. This is probably not something to worry about at this stage, given that both reported much stronger figures than expected in January, but it could be an early signal that the improvement in the housing market is beginning to slow.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Latest in Cyprus and Italy
2:08 CHART – EURUSD analysis
3:26 CHART – USDJPY analysis
4:18 CHART – FTSE 100 analysis

[video=youtube_share;u1fQZ0p86mY]http://youtu.be/u1fQZ0p86mY[/video]

Forex research: Global markets daily

[Alpari_UK]

[B]German unemployment to fall despite eurozone uncertainty[/B]

Today’s UK opening call provides an update on:

• Banks in Cyprus reopen this morning, capital controls will be in place to prevent a bank run;
• Bersani cracking under the pressure;
• German unemployment to fall for fourth month;
• US expecting another upward revision to fourth quarter GDP.

Banks in Cyprus will reopen on Thursday, after being closed for almost two weeks while the government came to an agreement with the Troika over a bailout.

For the first time since the debt crisis began back in 2010, the bailout had a bail in aspect, which will see deposits over €100,000 hit with a levy that could be as large as 50%. Capital controls were put in place last night to prevent a run on the banks when they open this morning, however they are no overly tight and officials have confirmed that they are only temporary. If that’s the case then all they have done is delayed a bank run by a few weeks, so I expect that despite promises, they will actually stay in place for much longer than promised.

In Italy, an inability to form a coalition government since the elections last month, means that Italians will probably be heading back to the polls in a couple of months time. Comments from Bersani that “only an insane person would want to govern” Italy won’t help the situation and is unlikely to help his standing in the polls should more elections be called. With Bersani appearing to already be cracking under the pressure, Silvio Berlusconi’s PDL party and Beppe Grillo’s Five Star Movement now have an opportunity to steal further votes before the next election that could see Bersani lose his majority in the lower house.

German unemployment is expected to have fallen by another 4,000 in March, a fourth consecutive decline, although the unemployment rate is set to remain at 6.9%. Germany already boasts a very low unemployment rate compared to many of the other major economies, but the fact that it continues to drop during such uncertain times for the eurozone shows just how strong the German economy is. Retail sales, which have actually been quite volatile in Germany, are forecast to have risen again in February, by 0.4%.

In the US, the fourth quarter GDP figure is expected to be confirmed at 0.4%, which is a far cry from the 0.1% contraction figure that was originally released back in January. The economy has gone from strength to strength since the fourth quarter of 2012, as shown by the improvement in jobless claims this year, which has seen the four week moving average fall to a five year low. Another low figure of 340,000 is expected today.

[B]EURUSD[/B]

The pair broke below a key level of support earlier in the week, where the 200 day SMA crossed the 50 fib level. This is quite bearish for the pair and suggests we could see it fall back towards 1.2678, the 61.8 fib level. Just below here it should find further support around 1.2610. Today the pair is edging higher, which suggests we could see it retest the previous support level as a new area of resistance. This would act as confirmation of the break, prompting a move lower.

[B]GBPUSD[/B]

Sterling is trading higher again this morning, following a tough start to the week. The pair reached highs of 1.5250 last week before retracing, although I think in the coming weeks we could see 1.53 tested as a new level of resistance before the pair falls back towards 1.49. This was previously a major support level so if the pair does find resistance here, it would act as confirmation of the break and be very bearish. In the shorter term, the pair should find resistance around 1.5180, 1.52 and 1.5259.

[B]USDJPY[/B]

The pair is currently trading sideways following the 50% retracement over the past couple of weeks, from February’s lows to March’s highs. It is stuck in a range between 93.90 and 94.90 and may continue to trade here over the next week, with the Bank of Japan meeting on Wednesday and Thursday then providing some direction for the pair. If the central bank, under the new leadership of Haruhiko Kuroda, are as aggressive as they’ve promised it should act as a springboard for the pair, with the next targets being 96.7, 97.6 and 100.45. If they disappoint we could see the pair fall further, with 93.08 being the next major support.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

[B]Mini bank run expected when Cypriot banks reopen[/B]

Today’s US opening call provides an update on:

[ul]
[li]Mini run on Cypriot banks expected when they reopen this morning;
[/li][li]Dovish Fed members suggest asset purchases won’t be scaled back this year;
[/li][li]US fourth quarter GDP to be revised higher, jobless claims expected at 340,000.
[/li][/ul]
Cyprus is preparing to reopen its banks this morning, after container trucks full of cash topped up stocks in anticipation of a mini run on the banks. The Cypriot stock exchange will remain shut though until Monday.

A full run on the banks has been temporarily averted thanks to capital controls which were put in place last night. The reaction to the reopening of the banks in Cyprus today will be key to how the markets react. Large scale withdrawals will be seen as proof that once the capital controls are lifted, a full run on the banks will commence, leaving the banks relying on ECB support to avoid collapse.

This is the most likely scenario, given the levy that has been agreed on all accounts over €100,000 and the earlier attempts to impose losses on all accounts. If, somehow, we don’t see the kinds of withdrawals that we’re expecting, it will be taken as a sign that confidence in the banks, and the government, is not quite as bad as we anticipated and could prompt a move back to risk on in the markets. This is very unlikely though.

The US equities rally may not be coming to an end yet, despite the Dow recording all time highs recently and the S&P coming within a whisker of its own record earlier this week. It has been suggested that US stocks are overbought and are due a correction, but that may have to wait. A few of the more dovish members of the Fed last night suggested that the current level of asset purchases, $85 billion per month, may not be scaled back this year.

There have been fears in the market recently that the Fed could scale back these purchases, which have been largely responsible for the rally to this point. These comments would suggest there’s nothing to worry about and that it’s only a matter of time until the S&P hits those all time highs.

The final fourth quarter GDP figure for the US will be released today and is expected to be revised higher again, to 0.4%. While this isn’t a great figure by US standards, it’s much better than the original estimate which suggested the economy contracted in the fourth quarter of 2012. There never was any real risk of recession in the US despite that original figure, however today’s figure will confirm this.

US weekly jobless claims are expected to be low once again, at 340,000. Last week’s 336,000 brought the four week moving average to its lowest level in five years, which together with the improvement in the non-farm payrolls has helped bring the unemployment rate back down to 7.7%.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

[Alpari_UK]

0:09 Reopening of Cypriot banks not as chaotic as expected;
1:09 German unemployment figures;
1:38 OECD forecasts higher global growth in Q1;
2:27 UK services figures suggest no recession;
3:07 US GDP and jobless claims data.

Forex research: Global markets daily

[Alpari_UK]

[B]Eurozone unemployment to hit record highs in March[/B]

Today’s UK opening call provides an update on:

• Cypriot accounts above €100,000 could face 60% levy;
• RBA keeps rates on hold at 3%;
• Eurozone manufacturing and unemployment figures to disappoint again;
• UK facing triple dip recession as manufacturing set to contract further in March.

Stock index futures are pointing to a slightly lower open on Tuesday, following the long bank holiday weekend.

It’s gone a little quieter on the Cyprus front, with banks now open again and capital controls temporarily preventing a major run on the banks. Accounts above €100,000 could now face a levy of up to 60%, up another 10% on the figure being talked about at the end of last week and more than 50% higher than the original figure that was rejected in parliament a few weeks ago. With the figure rising on a daily basis, it’s no surprise that people are doing everything they can to get the money out of the country, even if they risk having it confiscated at the border.

The Reserve Bank of Australia kept interest rates on hold at 3% over night, as expected. An improvement in the China, Australia’s largest export market, in the first quarter of the year has helped provide a boost to the Australian economy, which has in turn reduced the need for further stimulus from the central bank. While the statement warned that growth could be below average, there was nothing in it that suggested that we could see a rate cut in the next few months.

Manufacturing PMIs in the eurozone are expected to reflect the waning confidence in the eurozone over the last month, with the political stalemate in Italy and bailout in Cyprus acting as a reminder to businesses and consumers that the debt crisis is far from over. A small pull back is expected across the board, with France once again contracting at a much faster rate than the others.

Unemployment figures for Spain and Italy are unlikely to improve the mood in the eurozone, with both expected to rise yet again as the recession in both countries deepens. Unemployment in Spain is now more than 25%, while youth unemployment has been above 50% for some time. It’s not quite as bad in Italy, however another increase today to 11.8% is still a major concern for a country that has been stuck in recession since the middle of 2011 and is unlikely to return to growth this year.

Unemployment in the eurozone is expected to hit another all time high, rising to 12% in February and showing no signs of slowing. Once again, this is only going to increase the pressure on the ECB in the coming months to cut interest rates and provide some stimulus to the region. Germany has long opposed another rate cut, however with inflation in the country expected to remain at 1.5%, even they can’t continue to justify keeping rates as they are.

It’s not looking much better for the UK, with the country facing the possibility of a triple dip recession in the first quarter of this year. The manufacturing PMI is expected to show contraction in the industry again in March. The only upside here is that manufacturing makes up a very small part of UK output and as long as the services industry continues to perform well, we should avoid another recession.

[B]EURUSD[/B]

The pair is trading slightly higher this morning, following a strong start to the week. It did find resistance earlier in the session, where the 200 day SMA crosses the 50 fib level, which could now prompt a move back towards the 61.8 fib level, around 1.2678, over the next couple of weeks. If the pair does start to edge lower, it should find support around 1.2843, this morning, followed by 1.2770 and 1.2750.

[B]GBPUSD[/B]

Sterling is struggling to push above 1.5250 against the dollar, having found resistance around here again this morning. If it does push above here, the pair could test 1.53, which should provide strong resistance given that it was such a major support level previously. If not, a move back towards 1.49 looks likely in the coming months, with the pair still looking very bearish. It is currently finding support this morning around 1.5218, however I expect it to break below here, finding further support around 1.5177, 1.5110 and 1.5091.

[B]USDJPY[/B]

The dollar has weakened further against the yen, falling below 93.0 for the first time since the beginning of March. It has also broken below the 61.8 fib level, which had been acting as a key level of support. With the Bank of Japan expected to ease monetary policy on Thursday, I don’t expect the pair to weaken much further over the next couple of days. If we do see further weakness, the pair should find support around 92.20, followed by 92.0.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]