{"id":1068,"date":"2012-07-08T14:10:00","date_gmt":"2012-07-08T14:10:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2012\/07\/08\/forex-markets-as-we-expected-the-euro-dropped-in-the-wake-of-the-ecb-rate-cut\/"},"modified":"2012-07-08T14:10:00","modified_gmt":"2012-07-08T14:10:00","slug":"forex-markets-as-we-expected-the-euro-dropped-in-the-wake-of-the-ecb-rate-cut","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/forex-markets-as-we-expected-the-euro-dropped-in-the-wake-of-the-ecb-rate-cut\/","title":{"rendered":"Forex markets: As we expected, the euro dropped in the wake of the ECB rate cut."},"content":{"rendered":"<p style=\"text-align: justify;\"><span lang=\"EN-GB\">The decline is also compatible with lingering  uncertainties over the resolution of the debt crisis, that will again be  the dominant market theme next week. <\/span>..<span lang=\"EN-GB\">&#8230;<\/span><strong><span lang=\"EN-GB\"> <\/span><\/strong><span lang=\"EN-GB\"> <\/span><span lang=\"en-GB\"><\/span><span lang=\"en-GB\"> <\/span><span lang=\"EN-GB\"><\/span><span lang=\"en-GB\"> <\/span><\/p>\n<p>  <!--more-->  <\/p>\n<ul> <\/ul>\n<hr \/>\n<p> <span style=\"font-family: arial,helvetica,sans-serif;\"><span style=\"font-size: 10pt;\"> Sign up for our free newsletter to receive weekly news from BONDWorld<br \/><a href=\"index.php?option=com_acymailing&#038;view=user&#038;Itemid=107\"><strong>Click  here to register for your free copy<\/strong><\/a><\/span> <span style=\"font-size: 10pt;\"><a href=\"index.php?option=com_acymailing&#038;view=user&#038;Itemid=1023\"><strong> <\/strong><\/a><\/span><\/span>  <\/p>\n<hr \/>\n<p style=\"text-align: justify;\"><span style=\"font-family: arial,helvetica,sans-serif;\"><span style=\"font-size: 10pt;\"><strong>For professional investors and advisers only<\/strong><\/span><\/span><\/p>\n<hr \/>\n<p> <span lang=\"EN-GB\">In the event of  favourable developments on this front, the euro may start to climb back.  The BoE also took an expansive stance, by stepping up the APF and  drawing a picture of the UK economy in shades of gray. However, sterling  seems better supported and should outperform the euro.<\/span> <\/p>\n<p class=\"MsoNormal\" style=\"text-align: justify;\"><span lang=\"EN-GB\"><strong>EUR<\/strong> \u2013 The ECB has cut rates. Last week we wrote: \u201cOn the whole, a refi rate  cut could weaken the euro as an immediate impact reaction. In any case,  the exchange rate decline is unlikely to extend to the lows hit at the  beginning of the month in the 1.22 area, stopping in the 1.23 area at  the most\u201d. This proved to be the case: following the ECB\u2019s announcement,  the euro dropped to EUR\/USD 1.2364, moving from a high of 1.2681 on  Monday. We believe the single currency\u2019s reaction is compatible with the  economic and market situations. The correction responds both to the  narrowing of the interest rate differential, and to lingering  uncertainty over the resolution of the debt crisis, as well as to the  euro area\u2019s weak macroeconomic outlook, regardless of the crisis. From a  purely technical point of view, the breakthrough of 1.2441 aids a  reopening of the downside front towards 1.22-1.20. This is the time most  prone to a concentration of downside risks. The interest rate cut marks  the acknowledgement that there has been an overall deterioration, and  that the response to the euro area\u2019s problems still hasn\u2019t been  sufficient. Also, for what concerns the debt crisis, the outcome of the  European Council summit, while certainly positive, leaves open issues  that can no longer be postponed. Therefore, next week will be important  in light of the European calendar of events, starting with the Eurogroup  meeting on Monday. Positive developments on this front could push the  euro back up towards 1.25-1.26. <\/span>Otherwise, downside of between 1.22 and 1.20 would linger.<span lang=\"EN-GB\"> <\/span><\/p>\n<p class=\"MsoNormal\" style=\"text-align: justify;\"><span lang=\"EN-GB\"><strong>GBP <\/strong>\u2013  As widely expected, the BoE has expanded the APF, from 325 to 375  billion pounds, although it justified the decision using markedly dovish  tones: (1) the growth scenario has deteriorated, (2) inflation has  dropped more than expected, (3) the problems faced by the euro area  continue to represent a major risk for the UK economy, even after the  positive outcome of the European Council summit. The new asset purchase  programme will have a duration of four months, but the BoE will keep its  amount monitored, i.e. a further expansion cannot be ruled if the  situation should worsen. This could expose the pound to some downside,  but only against the dollar. This is because we believe that in the  present context, a direct comparison between sterling and the euro shows  that the UK currency has the capacity to outperform. We think the  market has confidence in the programme launched jointly by the BoE and  the Treasury to support the economy. On the other hand, there is no such  confidence in the euro area, where the perception is that it will not  be easy to implement the actions still necessary to solve the crisis. In  the present phase \u2013 temporary in our view \u2013 we therefore think that the  EUR\/GBP exchange rate may extend and amplify its fluctuations below the  EUR\/GBP 0.8000 mark. <\/span><\/p>\n<p class=\"MsoNormal\" style=\"text-align: justify;\"><span lang=\"EN-GB\"><strong>JPY<\/strong> \u2013 The yen stayed broadly stable against the dollar, fluctuating between  USD\/JPY 79.31 and 80.10, although downside evidently prevailed in the  week. However, rather than a weakening of the yen, this was a widespread  strengthening of the dollar in response to the expansive measures put  in place by the ECB, the BoE and PBoC. The USD\/JPY 80.00 mark will stay  hard break through autonomously unless further progress is made in  resolution of the euro area crisis. However, an intervention does not  seem likely, barring a sudden and violent surge in risk aversion. <\/span>Therefore, the BoJ meeting next week will be under the spotlights.<span lang=\"EN-GB\"> <\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-family: arial,helvetica,sans-serif;\"><strong> <\/strong><\/span><\/p>\n<hr \/>\n<p> <span style=\"font-family: arial,helvetica,sans-serif;\"><strong> <\/strong><\/span> <\/p>\n<p style=\"text-align: justify;\"><strong><span style=\"font-family: arial,helvetica,sans-serif;\">Appendix<br \/>An<\/span>alyst Certification<\/strong><br \/>The  financial analysts who prepared this report, and whose names and roles  appear on the first page, certify that: (1) The views expressed on  companies mentioned herein accurately reflect independent, fair and  balanced personal views; (2) No direct or indirect compensation has been  or will be received in exchange for any views expressed. Specific  disclosures: The analysts who prepared this report do not receive  bonuses, salaries, or any other form of compensation that is based upon  specific investment banking transactions.<\/p>\n<p><strong>Important Disclosures<\/strong><br \/>This  research has been prepared by Intesa Sanpaolo S.p.A. and distributed by  Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the  London Stock Exchange) and Banca IMI Securities Corp (a member of the  NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for  the contents of this report. Please also note that Intesa Sanpaolo  S.p.A. reserves the right to issue this document to its own clients.  Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo  Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both  authorised by the Banca d&#8217;Italia, are both regulated by the Financial  Services Authority in the conduct of designated investment business in  the UK and by the SEC for the conduct of US business.<br \/>Opinions and  estimates in this research are as at the date of this material and are  subject to change without notice to the recipient. Information and  opinions have been obtained from sources believed to be reliable, but no  representation or warranty is made as to their accuracy or correctness.  Past performance is not a guarantee of future results. The investments  and strategies discussed in this research may not be suitable for all  investors. If you are in any doubt you should consult your investment  advisor. <br \/>This report has been prepared solely for information  purposes and is not intended as an offer or solicitation with respect to  the purchase or sale of any financial products. It should not be  regarded as a substitute for the exercise of the recipient\u2019s own  judgement.<br \/>No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities  accept any liability whatsoever for any direct, consequential or  indirect loss arising from any use of material contained in this report.  <br \/>This document may only be reproduced or published together with the  name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.. Intesa Sanpaolo  S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management  Policy for managing effectively the conflicts of interest which might  affect the impartiality of all investment research which is held out, or  where it is reasonable for the user to rely on the research, as being  an impartial assessment of the value or prospects of its subject matter.  A copy of this Policy is available to the recipient of this research  upon making a written request to the Compliance Officer, Intesa Sanpaolo  S.p.A., 90 Queen Street, London EC4N 1SA.<br \/>Intesa Sanpaolo S.p.A. has  formalised a set of principles and procedures for dealing with  conflicts of interest (\u201cResearch Policy\u201d). The Research Policy is  clearly explained in the relevant section of Banca IMI\u2019s web site  (www.bancaimi.com).<br \/>Member companies of the Intesa Sanpaolo Group, or  their directors and\/or representatives and\/or employees and\/or members  of their households, may have a long or short position in any securities  mentioned at any time, and may make a purchase and\/or sale, or offer to  make a purchase and\/or sale, of any of the securities from time to time  in the open market or otherwise. Intesa Sanpaolo S.p.A. issues and  circulates research to Qualified Institutional Investors in the USA only  through Banca IMI Securities Corp., 245 Park Avenue, 35th floor, 10167  New York, NY,USA, Tel: (1) 212 326 1230. Residents in Italy: This  document is intended for distribution only to professional investors as  defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a  printed document and\/or in electronic form. Person and residents in the  UK: This document is not for distribution in the United Kingdom to  persons who would be defined as private customers under rules of the  FSA.<br \/>US persons: This document is intended for distribution in the  United States only to Qualified Institutional Investors as defined in  Rule 144a of the Securities Act of 1933. US Customers wishing to effect a  transaction should do so only by contacting a representative at Banca  IMI Securities Corp. in the US (see contact details above). <br \/><strong><br \/>Valuation Methodology<\/strong><br \/>Trading  Ideas are based on the market\u2019s expectations, investors\u2019 positioning  and technical, quantitative or qualitative aspects. They take into  account the key macro and market events and to what extent they have  already been discounted in yields and\/or market spreads. They are also  based on events which are expected to affect the market trend in terms  of yields and\/or spreads in the short-medium term. The Trading Ideas may  refer to both cash and derivative instruments and indicate a precise  target or yield range or a yield spread between different market curves  or different maturities on the same curve. The relative valuations may  be in terms of yield, asset swap spreads or benchmark spreads.<br \/><strong><br \/>Coverage Policy And Frequency Of Research Reports<\/strong><br \/>Intesa  Sanpaolo S.p.A. trading ideas are made in both a very short time  horizon (the current day or subsequent days) or in a horizon ranging  from one week to three months, in conjunction with any exceptional event  that affects the issuer\u2019s operations. In the case of a short note, we  advise investors to refer to the most recent report published by Intesa  Sanpaolo S.p.A\u2019s Research Department for a full analysis of valuation  methodology, earnings assumptions and risks. Research is available on  IMI\u2019s web site (www.bancaimi.com) or by contacting your sales  representative.<\/p>\n<p>Source: BONDWorld &#8211; Intesa Sanpaolo \u2013 Research Department<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The decline is also compatible with lingering uncertainties over the resolution of the debt crisis, that will again be the dominant market theme next week. ..&#8230;<\/p>\n","protected":false},"author":2,"featured_media":3463,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[22],"tags":[],"class_list":["post-1068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-makrooekonomische-daten"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1068","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1068"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1068\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3463"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}