The risk appetite is still depressed by the proposal of the Cyprus rescue plan proposal by EU and IMF despite the recent space given to it to get Eur5.8B out of its banking sector depositors to let it fulfill its previous obligation of insuring the accounts amounts which are less than Eur100k.
The voting is planned to be today after being delayed 2 times, looking for much more flexibility from EU and IMF and also looking for backing to this plan inside Cyprus. The other option as its President Nicos Anastasiades has said is the bankruptcy of the biggest 2 Cypriot banks at least.
But the implications of the plan announcement are in need of analysis. We have seen the greenback rising with the Japanese yen across the broad on the risk aversion and also we could see again the goldrising above $1600 per ounce, level with the beginning of the week as it looked to the investors for a clear option for avoiding the risk.
The deal itself looked like a punishment imposed on the Cyprus bank depositors who have among them offshore money launderers.
The Mediterranean island has been accused during the negotiations of letting money in the island with no restrictions or accurate accounting that can show clear targets of this money and so the rescue plan came to look like a threat to those who are looking to do this process there. The euro group has seen recently in the ballooning of the Cypriot banking system compared to its GDP and compared to its European counterpart enough of a clue of that.
So, the remarks from ECB member Jorg Asmussen to calm down the market by showing no intention to do a similar step in other European countries and that Cyprus is a special case. But the action has left in the market sentiment and in investors’ minds the possibility of having a similar stance in higher indebted bigger countries in the EU like Spain which has debt to GDP ratio at 84% in 2012 after its debt has grown to Eur845B in 2012. The central bank of Spain or Italy both go directly to the markets for financing their debt with no transaction from the ECB OMT as there is no rescue plan for any one of them while Greece, Portugal and Ireland have this option.
While the financial, economical and political situations are getting complicated in Italy which has a bigger economy than the double of these last three ones.
So, the stance can be miserable to the EU, in the case of deterioration of the crisis and it’s now highly probable with no secured stable government over the short term that can implement austerities measures and spur growth in the same time while the offensive stance against the austerities measures there was a key of collecting votes.
So, these measures can be exposed to be cut or suspended in Italy which has unemployment rate now at 11.7% in last January and industrial productions at its lowest amount since 1990 in last December and also GDP shrinking at a faster pace q/q in Q4 by 0.9% from 0.2% in Q3 driving its debt to GDP ratio up to 127% in 2012.
The implication of this stance was clear last week with yield over 3 year Italian uncovered bonds auction rising to 2.48% from 2.3% days before the elections when it was not well-known between Birsani and Berlusconi from 1.85% at the Auction before that while the tendency to safer positions dragged down the yields over the 2 years German Bunds to 0.06% from 0.21% in the previous auction of it and this percentage can go negatively again in the future, in the case of having further dovish sentiment in EU with more worries about the debt crisis.
EUR/USD can now face rising psychological level of 1.30 which could cap yesterday. Breaking it can open the way for higher resisting levels at 1.3106, 1.3134, 1.3162, 1.3317, 1.3433, 1.3519, 1.3598 before 1.3709 which has been reached after US non-farm payrolls of January which has shown adding 157k jobs. That has been revised down to 119k with the February labor report which has shown adding 236k out of the farming sector supporting the greenback which is facing now important supporting level of the single currency. It could hold unbroken in the beginning of this week too at 1.2876 and it could prop up the pair also after reaching it after US non-farm payrolls of November which added 161k jobs.
While it has been reached when there was a day before it increasing expectations of having another interest rate cut by ECB after last December 6th, the ECB meeting had come with the decision of having the interest rate unchanged at 0.75% by a majority as what happened in the next 2 meetings after that meeting showed ECB economic downward revision of its economic projection of the inflation and growth in EU too. But getting down below 1.2876 can be met by another supporting level at 1.2734 before 1.2661 again whereas it could rebound after the market worries about Greece got down while breaking it too can lead to another supporting level at 1.2464.
The voting is planned to be today after being delayed 2 times, looking for much more flexibility from EU and IMF and also looking for backing to this plan inside Cyprus. The other option as its President Nicos Anastasiades has said is the bankruptcy of the biggest 2 Cypriot banks at least.
But the implications of the plan announcement are in need of analysis. We have seen the greenback rising with the Japanese yen across the broad on the risk aversion and also we could see again the goldrising above $1600 per ounce, level with the beginning of the week as it looked to the investors for a clear option for avoiding the risk.
The deal itself looked like a punishment imposed on the Cyprus bank depositors who have among them offshore money launderers.
The Mediterranean island has been accused during the negotiations of letting money in the island with no restrictions or accurate accounting that can show clear targets of this money and so the rescue plan came to look like a threat to those who are looking to do this process there. The euro group has seen recently in the ballooning of the Cypriot banking system compared to its GDP and compared to its European counterpart enough of a clue of that.
So, the remarks from ECB member Jorg Asmussen to calm down the market by showing no intention to do a similar step in other European countries and that Cyprus is a special case. But the action has left in the market sentiment and in investors’ minds the possibility of having a similar stance in higher indebted bigger countries in the EU like Spain which has debt to GDP ratio at 84% in 2012 after its debt has grown to Eur845B in 2012. The central bank of Spain or Italy both go directly to the markets for financing their debt with no transaction from the ECB OMT as there is no rescue plan for any one of them while Greece, Portugal and Ireland have this option.
While the financial, economical and political situations are getting complicated in Italy which has a bigger economy than the double of these last three ones.
So, the stance can be miserable to the EU, in the case of deterioration of the crisis and it’s now highly probable with no secured stable government over the short term that can implement austerities measures and spur growth in the same time while the offensive stance against the austerities measures there was a key of collecting votes.
So, these measures can be exposed to be cut or suspended in Italy which has unemployment rate now at 11.7% in last January and industrial productions at its lowest amount since 1990 in last December and also GDP shrinking at a faster pace q/q in Q4 by 0.9% from 0.2% in Q3 driving its debt to GDP ratio up to 127% in 2012.
The implication of this stance was clear last week with yield over 3 year Italian uncovered bonds auction rising to 2.48% from 2.3% days before the elections when it was not well-known between Birsani and Berlusconi from 1.85% at the Auction before that while the tendency to safer positions dragged down the yields over the 2 years German Bunds to 0.06% from 0.21% in the previous auction of it and this percentage can go negatively again in the future, in the case of having further dovish sentiment in EU with more worries about the debt crisis.
EUR/USD can now face rising psychological level of 1.30 which could cap yesterday. Breaking it can open the way for higher resisting levels at 1.3106, 1.3134, 1.3162, 1.3317, 1.3433, 1.3519, 1.3598 before 1.3709 which has been reached after US non-farm payrolls of January which has shown adding 157k jobs. That has been revised down to 119k with the February labor report which has shown adding 236k out of the farming sector supporting the greenback which is facing now important supporting level of the single currency. It could hold unbroken in the beginning of this week too at 1.2876 and it could prop up the pair also after reaching it after US non-farm payrolls of November which added 161k jobs.
While it has been reached when there was a day before it increasing expectations of having another interest rate cut by ECB after last December 6th, the ECB meeting had come with the decision of having the interest rate unchanged at 0.75% by a majority as what happened in the next 2 meetings after that meeting showed ECB economic downward revision of its economic projection of the inflation and growth in EU too. But getting down below 1.2876 can be met by another supporting level at 1.2734 before 1.2661 again whereas it could rebound after the market worries about Greece got down while breaking it too can lead to another supporting level at 1.2464.