Daily Reports FX Greece 20th October 2008

publication date: Oct 20, 2008

Dollar Comeback! Is it Real? Will Bernanke Make it Happen?

The week begins with markets trading on a positive note, NIKEI up 300 points during the night and European markets printing some gains after the open. Euro seems to be trading upwards as well, however until 1.3530 breaks we cannot say that the European currency is going places.
EUR/USD still between 1.3350-1.3550 and until we see some clear signs that those levels will be broken, the pair is poised to stay within that range. The dollar does not give its gains back easily and is still kept bid all across the board.
The calendar this week is quite full, with important t events almost on a daily basis. Today we have the “Great” Bernanke speaking in front of the House regarding the latest economic developments and we can be sure that his words will be monitored closely by all market participants. There will be Q&A afterwards and we can tell that House members won’t let him have an easy ride explaining the latest shenanigans.
Other important events this week to keep us interested are the BOE minutes from the last rate decision a few weeks ago and the forecasts want all 9 members to vote unanimously a rate cut. That is not a surprise as the last time that Bank cut its rates was in the coordinated action that took place form 7 central Banks and BOE was one of them. The fact that economic data disappointed in the last weeks made analysts speculate that there might be more cuts to come in the coming weeks.
 Also, we have the rate decision by Bank of Canada and the general feeling is that the Bank may choose to cut rates once again in order to avoid further deterioration in the Finance sector. Let’s not forget that traders have already priced in the cut and that can be easily seen in USD/CAD were that pair has appreciated more than 700 points in the last few weeks.
Markets are waiting to see what the OPEC meeting will decide at the end of the week and all bets are for a cut of oil supply due mainly to the latest drop in the price of crude oil. Last week the crude oil was trading heavily on the downside and it even broke $70 per barrel before rebounding again. All the latest fears of a global recession weigh still in the oil and analysts speculate that OPEC officials will decide to cut supply in order to put a temporary break in the recent fall. However, we should never underestimate the power of fear and uncertainty as we have seen in the last few weeks, that whatever the world leaders are doing to restore the confidence back in the markets, they fail as risk aversion still persists and our guess is that it will be with us till we see something major happening to change the negative sentiment…
Until that happens, let’s see what this week brings and how the markets will perceive all the economic events unfolding in the coming days…