Possible ECB April Rate Hike Trumps Debt Woes - The number one driver in the forex market right now is that the ECB is going to raise rates at its next policy meeting in April and nothing else matters. That nothing else happens to be a Fitch downgrade in Spain's outlook late Friday and today's downgrade by Moody's of Greece's rating by three notches to B1. Moody's even noted that 20% of the B1 rated sovereigns default within five years but the Euro barely flinched and moved higher. On top of this, comes news that Germany has rejected Irish requests for lower rates on the bailout package from the EU/IMF. I don't know how long the market can continue to shrug off Europe's sovereigns debt issues. German Chancellor Angela Merkel and French President Nicolas Sarkozy have both said that they will do whatever is needed to support the Euro, and promised that meetings scheduled for March 11 and on March 24 and 25 will produce a “comprehensive” solution to the crisis - stay tuned. Meanwhile, speculators and managed money are both on the short USD trade as the US Federal Reserve is expected to keep monetary policy loose for some time, reflecting more concern about the outlook for growth than about inflationary pressures. In Asia, the Yen moved higher against the USD as investors raise their appetite for risk and shrugged off the latest Japanese political problem. The resignation of Japan’s foreign minister, Seiji Maehara, over an illegal political donation piles further pressure on Prime Minister Naoto Kan’s unpopular government, increasing speculation that he may resign if his DPJ party does not do well in local elections in April. In Canada, the CAD continued to move higher after the nation’s biggest export, crude oil, rose to a 29-month high in New York. Nervousness that the unrest in the biggest oil producer in Africa, Libya, could spread to other oil-rich nations in the Mideast, particularly Saudi Arabia continue to pressure the price of oil.
No comments:
Post a Comment