Forex Intraday Round-Up: EUR Advances on Prospects of a Successful Greek Debt Buyback Programme

on Dec 4, 2012


The EUR/USD pairing scored further gains today and climbed to a session high of 1.3086 before slightly retreating to 1.3078/79 or 0.19 percent higher than yesterday. According to Lee Hardman, Forex analyst at the Bank of Tokyo Mitsubishi, the euro derives its support from the narrowing Eurozone sovereign credit risk premium. Most recent data shows 10 year yield spreads between Spanish and Italian over German government bonds narrowed towards 3.8 and 3.0 percent respectively.

The single currency gained significant momentum from yesterday’s market reaction to details of the Greek debt buyback programme. The premium paid over previous market prices for Greek bonds held by private investors will be higher than anticipated, which means the likelihood of enough sellers participating has increased and all of the €10 billion (£8.11 billion) could potentially be spent. If successful, the Greek government could buy back debt with a face value of €30 billion (£24.3 billion) or almost half of the outstanding €61.5 billion (£50 billion). No further data is expected from the euro bloc today.

According to the Financial Markets Research team at Radobank, the short positions in the euro dropped by almost 30 percent and considering the break above the psychological 1.3000, the EUR/USD pair is poised to advance. The weakness in the USD will remain a major driver for the pair’s upward movement.
The GBP/USD is still holding above the 1.6100 level despite disappointing UK construction PMI released today at 9.30 GMT.

!m[GBP Remains in Positive Territory Despite Weak UK Construction PMI](/uploads/story/955/thumbs/pic1_inline.png)At 12.20 GMT the pair was trading at 1.6115/18 after briefly climbing above the one month high of 1.6124 and touching 1.6131. “We are not expecting any major moves unless the construction PMI is wide of expectations,” said Richard Driver, analyst at Canton FX, as quoted by Reuters. “But broadly speaking we see technical resistance above $1.62.”

In its report Markit and the Chartered Institute of Purchasing & Supply said that their UK construction PMI fell to a seasonally adjusted 49.3 in November from 50.9 in the previous month. A reading below 50 indicates contraction in the sector. “A protracted decline in workloads, the double-dip UK recession and shrinking investment spending has made 2012 a year to forget for the construction sector,” commented Tim Moore, senior economist at Markit. New orders declined at the fastest pace over three-and-a-half years in November and jobs reduction was at the steepest rate in almost two years.
The pair managed to penetrate the key support level at 82.00 and fell to 81.87 before retracing its losses. On the data front, the Japanese monetary base expanded 0.5 percent over the past twelve months, below expectations and with prior reported figures at 11.4 percent and 10.8 percent.
The pair remains largely range-bound around the 82.00 level in intraday trading.
“The longer-term dynamics for JPY are clearly negative though, given the structural deterioration in the current account and the consistent underperformance of Japanese data momentum compared to the rest of the world.” said Jonathan Cavenagh, researcher at the Australian bank Westpac, as quoted by


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