Reuters Insider - Inside the News: Euro Under Widespread Pressure: Kimberley
13/06/2016 11:07
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Description: There is a widespread selling pressure on the euro
through different products and structures rather
than a straight forward sell-off against the
dollar and government bonds, says Neal Kimberley.
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Short Link: http://link.reuters.com/sab65r
Transcript (May be auto-generated)
1100 GMT. The Euro finds little respite as Portugal resists calls to seek a
bailout; while equity and commodity prices rise despite the stronger Dollar.
Japan shows its support for Europe's struggle pledging to buy around a fifth of
Euro zone bonds with purchases. Finance Minister Yoshihiko Noda says Tokyo will
buy Euro zone bonds to bolster confidence in the European Financial Stability
Facility. Tokyo's pledge follows reports the European Central Bank was buying
Portuguese bonds Monday after speculation Portugal was fending off pressure to
accept the financial aid package. The Euro steadies just above four-month low
hit on Monday, down 0.10% from late New York levels having risen as high as
1.2992 following those Noda comments. Sinking against the Swedish Crown though
this morning, hitting a seven-year low as investors sold the single currency on
concerns of Euro zone debt. The Euro fell to a low of SEK8.8840, its lowest
since September '03. And spot gold set for a second day of gains with premiums
for gold bars jumping to a two-year high. Spot gold now nudging session highs
close to 1,381.30-an-ounce. Drivers behind the move today include deepening
fears over Portugal's finances, aggravated by a Central Bank Board Member saying
the country would leave its debt crisis behind more easily if it received
international financing. Peripheral bond spreads widening and pressure remains
intense ahead of Portugal's auction of $1.25 billion of 5- and 10-year bonds
Wednesday. Portugal's Prime Minister Jose Socrates is holding a news conference
today. And he has been announcing below target budget deficits for 2010, but no
bailout. Joining me to discuss the road ahead for Portugal and Japan's plan to
buy EFSF bonds, Reuters FX Analyst Neal Kimberley. Neal, peripheral bond spreads
widening. We're not having, we're not seeing that much impact from the Euro. Why
is that? At the moment, Axel, there's supposed to be a decent-sized barrier at
$1.2900. Talk of Asian bids coming in at $1.2910/20. Below that, another big
barrier at $1.2850 which is expected to be protected. And the market, as you
mentioned, is looking at other things like Euro stock. It is more than one way
to skin a cat. So they're selling the Euro in various ways here, and the
pressure's also building in the bonds. So this is more widespread pressure on
the Euro through different products, different structures rather than
straightforwardly well, we're gonna sell the government bonds and we're gonna
sell the Euro-Dollar. Alright. What about Euro-Yen? Hovering around, what is it?
107.50. Did we see much of a move on the back of Noda? Well, Mr. Noda did the
job. I mean he got it up. It's interesting, you know, this Euro zone crisis has
been banging on for months and months and months now. And as soon as Euro-Yen
gets down to the low 107s, the Japanese finally decide they're gonna buy some of
the EFSF. Funny that. They're obviously aware that there's a shade lower to stop
losses on Euro-Yen as we go towards the lows of 2010, which was in the mid-105s.
And the talk in Tokyo is that Mr. and Mrs. Watanabe, the retail investor,
sitting there very short of Yen, struggling with possible margin calls if we go
down through 106.50 and the Japanese exporters who we mentioned last week on
this program were looking for option structures to hedge themselves 105, locking
in a big loss given that their budget rate's at 110. They're on the hedge. And
we're going into the fourth quarter of the Japanese financial year.
So they're on the edge of capitulation in the cross as well. So no surprise
really that Mr. Noda comes out and gives the Euro-Yen a bit of a fillip by being
supportive towards the EFSF. How long will it last? I don't think it's gonna
last very long. Belgium's now in the trigger sites of the market. It's not just
about the periphery as we know it. Belgium, just been demoted from the
premiership to the championship. They've become the strongest of the periphery.
How many people are left in the quarter pay for all of this? And look at the
CDSs in the core. Germany, France: CDS moving up. Very good, Neal. Many thanks
for that.
Australian Dollar falling across the board today as worsening floods threaten
Queensland and thousands evacuate their homes. Investors speculating that the
damaging floods could further put off any hike in rates. The Aussie has hit a
four-week low of 0.9822. It's also sliding against the Euro, the Kiwi as
investors continue to trim that long Aussie positions. And the effects of the
big freeze in Europe over the Christmas period revealing themselves in a mixed
picture from European retailers. Germany's Metro says sales were down over the
period after snow dampened consumer spending. But the UK's Marks & Spencer saw
gains of nearly 3%. Both firms predict rising sales in 2011. That's it. Coming
up, the UK sells first inflation-linked bonds of 2011. Insider has the analysis
and reactions at 1130. Stay with us for updates on the hour. I'm Axel Threlfall.
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