Global Forex: Euro Dollar neutral as Wiedman hints that further rate cuts at the ECB are not a given

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Published on Friday, 15 June 2012 09:39

Written by Will Peters

Key news items coming out of the Eurozone.

The euro dollar exchange rate (Currency:EURUSD) is virtually unchanged on a day-to-day basis. EUR-USD is at 1.2634.

"The pair is approaching critical resistance at 1.2668; a clear break here would open 1.2786. A move below 1.2542 would resume weakness to 1.2436," say UBS.

(We publish the latest currency forecasts on our IMT site, access is Free via the Facebook entry page here).



ECB’s Weidmann said that “cultural differences” could make establishing a fiscal union difficult.

There was a hint that no further interest rate cuts at the ECB are likely when Weidmann went on to say the central bank, "can’t solve everything with a rate cut," and that if Greece does not meet its commitments this would lead to an interruption in the flow of external aid, which could in turn have repercussions on its chances of staying the euro.

Merkel said that Europe has the responsibility to create the political union that was not established when the euro was launched.

She added that this is a “Herculean task” but “unavoidable” and that if the euro fails then the EU will fail.

Newswires indicated that G20 central banks are preparing for coordinated action to provide liquidity if needed after the Greek elections. The Bank of England measures overnight are likely to be part of this.

Egan Jones downgraded France to BBB+ from A-. Earlier, Egan Jones downgraded Spain to CCC+ from B.

Moody’s downgraded a number of Dutch banks overnight.

Over in Switzerland we see the SNB kept its 3m LIBOR target at 0.00-0.25% on Thursday.

It reiterated that it is ready to buy unlimited quantities of foreign currencies and if necessary, take further measures at any time to enforce the EURCHF floor at 1.20.

SNB revised its growth forecast for 2012 to +1.5% (from +1.0%) due to an “unexpectedly strong winter half year”.

The inflation forecast for 2012 was revised slightly up to -0.5% from -0.6% for 2012. It also noted that the imbalances in the Swiss residential mortgage and real estate markets increased further in the last quarter.