Forex Intraday Round-up: EUR Rebounds from Session Lows after Greek Debt Sale

on Dec 20, 2012


The EUR/USD is once again trading in positive territory after falling to an intraday low of 1.3189. At 12.20 GMT the pair was changing at 1.3254/56 or 0.21 percent higher than yesterday. A sharp rally took place after the release of the German Producer Index and Import Price Index.
The German Producer Index eased less than expected to 1.4 percent while the Import Price Index grew at 1.1 percent. The Greek government revealed the completion of its debt buyback worth €31.9 billion (£26 billion).

Nick Bennenbroek, Head of Currency Strategy at Wells Fargo, believes that macroeconomic fundamentals remain persistently negative for the single currency. European confidence surveys are largely consistent with slow positive growth. The gap between the Eurozone PMI and the US ISM surveys is widening signalling a degree of underperformance that suggests a decline in the value of the euro against the dollar.

The European Commission gave its approval today to four Spanish banks for their restructuring plans which include cutting their balance sheets by between 25 to 40 percent over the next five years and scratching dividend payments. “The restructuring plans of BMN, Caja3, Banco CEISS and Liberbank will make these banks viable again, thereby contributing to restoring a healthy financial sector in Spain, while minimising the burden for the taxpayer,” EU Competition Commissioner Joaquin Almunia said in a statement. Reuters reported that the banks will not be allowed to make any takeovers during the restructuring period and shareholders will have to bear nearly €2 billion (£1.63 billion) of costs.

In Italy the Senate will vote on the budget law today, paving the way for Prime Minister Mario Monti’s resignation. The upper house began debating yesterday, one day behind schedule due to Silvio Berlusconi’s party request for more time to examine the bill. The bill will also have to pass through the Chamber of Deputies for a final approval as soon as tomorrow. “Investors are struggling to come to grips with what has become an extremely uncertain and volatile political climate in Italy,” opined Nicholas Spiro, managing director of Spiro Sovereign Strategy, as quoted by Bloomberg. “We very much doubt whether markets have adequately priced in the risks surrounding the election.”

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!m[GBP Holds Against USD Despite Weak UK Retail Data](/uploads/story/1075/thumbs/pic1_inline.png)
The GBP/USD rallied to a high of 1.6271 upon the London opening but the release of UK data pulled the pair down and at 12.40 GMT it was changing at 1.264/66. UK retail sales rose year-on-year from 0.8 percent to 0.9 percent, far below analysts’ expectations of a 1.5 percent increase. Ex-Fuel data also came out below expectations of 2.3 percent by rising from 1.4 percent to 2.0 percent. “GBP/USD has reached the 1.6300/07 resistance (September high, April high and the high from November 2010). This is a major medium term pivot that we must allow to hold the topside at least on the initial test”, wrote Karen Jones, analyst at Commerzbank, as quoted by She sees support for the pair at 1.6217.
The Brazilian real remains strong against the dollar and at 13.00 GMT the pair was trading at 2.0607/40. The Brazilian Central Bank conducted an auction today to sell up to $2 billion (£1.23 billion) on the spot market with repurchase agreement. The operation aims to provide liquidity to the forex market and was announced yesterday.

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