EUR/USD
The pair finished the week with a net loss of around 250pips as market participants continued to fret over the stability in the Eurozone following yet another technically uncovered German debt auction. In addition to that, Germany's Merkel said she sees no reason for Eurobonds, adding that Eurobonds would weaken us all and that a common interest rate on Euro-zone bonds sends the wrong signal. Separately to this, Fitch downgraded Portugal to BB+ from BBB-; outlook negative. Fitch also noted that a worse economic and/or fiscal performance than forecast could lead to a further downgrade and that although Portugal is funded to the end-2013, sovereign liquidity risk may increase materially towards the end of the programme if adverse market conditions persist. While Moody’s Investor Service said that rising French bond yields increase the fiscal challenges facing the nation which in turn resulted in renewed yield spread widening in respect to the benchmark German Bund. In other news, ECB’s Nowotny did not discount that the central bank may cut the borrowing rate in December, while the Bundesbank slashed its growth forecasts. Finally, technical studies indicate that supports are located at 1.3213 and then at the psychologically important 1.3200 level. On the other hand, resistance levels are seen at 1.3300 and then at 1.3351.
The pair finished the week with a net loss of approximately 300pips after the latest Q3 GDP report from the ONS revealed that the quarter driven entirely by manufacturers rebuilding their stocks of goods, and government spending. The minutes from the most recent MPC meeting showed that committee members discussed further increases to the asset program, but there was sense of apprehension about the potential impact of additional QE. Separately to this, BoE’s Broadbent noted that Britain's economy faces a roughly 50% chance of contracting in the Q4 and could even slip into recession. In other news, according to Rightmove, UK home sellers cut asking prices by the most in a year this month as the escalation of the Euro-area crisis deterred buyers and increased uncertainty about the outlook for the economy. In terms of technical levels, supports are seen at 1.5400 and then at 1.5270. On the other hand, resistance levels are seen at 1.5566/82 and then at 1.5692.
The pair edged higher throughout the week on the back of a stronger USD as market participants continued to speculate that lack of “bazooka” like action from the ECB will result in an outright recession in the Eurozone. Of note, this week, rating agency S&P said it ‘may be right’ to say closer to a Japan downgrade. Analysts added that Japanese PM Noda’s administration hasn’t made progress in tackling the public debt burden, an indication it may be preparing to lower the nation’s sovereign grade. Separately to this, the IMF warned in a new report that market concerns over fiscal sustainability could trigger a sudden spike in Japanese government bond yields that could quickly render the nation’s debt unsustainable as well as shake the global economy.
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