Operation Twist vs EU Sovereign Debt Crisis; can either come to a consensus?
The world economy is all ears on the ongoing Greek elections, the upcoming EU bond auctions, the FOMCs overnight meeting and whether China is to further implement interest-rate adjustments in the future.
How has the financial market been tracking over the past week?
- AUDUSD has consistently risen from the low 0.99’s to the low 1.02’s; close to a 3.0% weekly increase.
- A similar incident has taken place with the AUDEUR tracking in the low to mid 0.80’s (less than 2% away from the all time AUDEUR high), a 2% increase from last week’s 0.79 opening.
- US stocks advance for a fourth straight day, sending the S&P500 to the highest level in nearly six weeks.
- Spanish bond yields fell slightly from their all time high after Spain met its target at a bill auction. More to come.
Why has the financial market moved in the direction it has over the past week and where is it due to go?
- Pro bailout parties look to have claimed victory in the Greek Elections over the weekend.
- More recently, Greek leaders have been set to continue for a third straight day as they bid to form a coalition that will seek relief from austerity measures tied to emergency loans; the New Democracy party, Socialist Pasok and the Democratic Left party are poised to agree on a three-way coalition.
- Global investors have recently speculated that the Federal Reserve will announce more measures to stimulate the world’s largest economy: the AUD, CHF, gold and US government treasuries will be seen as safe havens if stimulus takes place; the AUDUSD appreciated from the low 0.60’s to the mid 0.90’s and gold prices almost doubled after the Fed bought US$2.3t during QE from December 08’ til June 11’. What will happen if Bernanke and his team go ahead with Operation Twist?
Economic Calendar
- US unemployment claims, CPI, industrial production and housing starts all worse than expected. The only positive piece of data out of the US is the 50k increase in building permits.
- German economic sentiment and PPI were worse than expected, with EU core CPI as expected.
- UK trade balance, CPI, RPI and jobless claims were all released worse than expected.